ORAL ANSWERS TO QUESTIONS

FOREIGN AND COMMONWEALTH OFFICE

The Secretary of State was asked—

Iran

Andrew Robathan: What recent developments there have been in UK-Iran relations.

David Miliband: I hope, Mr. Speaker, that you and the House will allow me to thank my hon. Friends the Members for East Renfrewshire (Mr. Murphy), for Pontypridd (Dr. Howells) and for Sheffield, Heeley (Meg Munn), who in their time at the Foreign Office all made an important contribution to the country, and did so with grace, humour and determination, in the best traditions of this House.
	In early September, the Iranian deputy Foreign Minister visited the UK for meetings with a range of Ministers and senior officials, including myself. The discussions covered Iran's nuclear ambitions, its role in the region, human rights and its relationship with the UK. We remain very concerned by Iran's behaviour in all those areas, and we are working bilaterally and with our partners to address them.

Andrew Robathan: I had the good opportunity to visit Iran in July, and it was extremely interesting. I share the Foreign Secretary's concerns about Iran's nuclear programme and human rights. However, we were told by people in Iran that bellicose statements threatening Iran militarily make those who do not support the Ahmadinejad regime rally behind it. It is a lesson of history that people will often rally behind a regime when their country is threatened. Will the Foreign Secretary take on board the fact that language is very important? That is not to say that we should not carry a big stick, but language is very important.

David Miliband: I agree with the hon. Gentleman. I am glad that he and other hon. Members have been to Tehran; that sort of engagement is important. I hope that he will not find bellicosity in statements from the Government—I do not believe that he will. The whole House will have read the bellicose statements made by President Ahmadinejad at the UN and will have been appalled by them. I can affirm to the hon. Gentleman that there will not be bellicosity from the Government on this issue, because is it far too important. We are also making a serious offer to Iran for economic, cultural and scientific co-operation. I think that that is the way forward, but it is not a way forward while the Iranian Government continue to defy not only the UN Security Council, but the International Atomic Energy Agency, which has continuing serious concerns about their programme and about their refusal to come clean about it.

Gerald Kaufman: Would my right hon. Friend, on behalf of Her Majesty's Government, make it clear that an attack on Iran by Israel would trigger off uncontrollable, convulsive and irreversible consequences that would damage not only the region, but the entire global system, and that such an attack must not take place? It would be an attack on one of the nastiest regimes in the world by another of the nastiest regimes in the world.

David Miliband: I do have genuinely huge respect for my right hon. Friend, but I cannot associate myself with that last sentence which he uttered. He will know that almost from my first day in this job I have emphasised that we are 100 per cent. committed to a diplomatic course with Iran and to a process of making it a serious offer that presents it major economic—never mind political—benefits, but that we must be insistent that a uranium enrichment programme in defiance of not only the UN Security Council, but of Iran's obligations under the non-proliferation treaty is a serious danger to stability in not just the middle east, but in the world. The middle east has enough problems without a nuclear arms race, and it is very important that we address that matter diplomatically on all fronts.

David Heathcoat-Amory: Could the Foreign Secretary say a little more about the outcome of the human rights discussions, because how Iran treats its own citizens gives some indication of how it might treat other people if it ever got the chance? Is he aware of reports of widespread executions, including mass executions and the executions of minors? If he has not already done so, could he make it clear to the Iranian Government that if they want to play a part in the world order and to persuade others that their own religion is other than barbaric, they must conform better to world standards of human rights?

David Miliband: The right hon. Gentleman makes an important point: how a country treats its own citizens is often a good indicator of how it is willing to treat citizens in other parts of the world. Perhaps I can give him the figures, which are horrific. Some 235 people have been executed in Iran during the first eight months of this year, and there were more than 300 executions last year—that was an increase from 177 in 2006. He also rightly says that Iran executes more juvenile offenders than any other country in the world. He is absolutely right to raise those human rights questions. We raise them too, and we deplore the way in which the Iranian Parliament is also now discussing a draft penal code that would set out a mandatory death sentence for the crime, quote unquote, of apostasy. If adopted, that would violate the right of freedom of religion, which is also an important basis of any civilised society. I am pleased that he has raised the issue of human rights, and I assure him that we have raised it too.

Denis MacShane: Would the Foreign Secretary agree that President Ahmadinejad's speech to the UN was probably the most consistently anti-Semitic speech by any leader since the end of the Third Reich? Does he also agree that the Conservative Muslim Forum's argument that Iran should have nuclear weapons is not helpful? The Prime Minister said last night, in an important speech, that we have to look at tightening up and increasing sanctions. Does the Foreign Secretary agree therefore that we need unity in this House, in Europe and with the United States and the world's democracies, but not with those who find excuses for Iran's leader?

David Miliband: My right hon. Friend makes three important points. If he looks at the special UN Security Council discussion on the middle east the week before last in New York, he will see that I specifically raised President Ahmadinejad's description of the, quote unquote, cesspool of Zionism, which was a disgraceful, anti-Semitic attack and a threat to a whole country. It was one member state of the UN threatening the life of another, which I am sure is abhorrent to all hon. Members. It is fair to say that we have seen a fair degree of unity across the House—in all three main parties—on this issue. The twin-track diplomatic approach is the right one. The so-called carrots of economic and scientific co-operation are right, but they have to be balanced by the potential sticks of economic sanctions. That is the right way for the world to express its displeasure at the way in which Iran is defying world opinion.

David Lidington: First, may I associate my colleagues with the tribute to the outgoing members of the Foreign Secretary's ministerial team? I also welcome his three new colleagues and hope that they have a good, fruitful and enjoyable time at the Foreign and Commonwealth Office—[Hon. Members: "Short!"]
	We too would like to see the day dawn when we can enjoy a better relationship with Iran, but given that the IAEA says that it is still being refused access to key sites and that the most recent UN resolution—1835—contained no new specific sanctions, does the Foreign Secretary believe that he should now seek to persuade the EU at least to agree to the oil and gas sanctions and the ban on export credits that the Prime Minister has repeatedly promised but that have not yet been delivered?

David Miliband: I am grateful for the hon. Gentleman's kind words and agree with all but one of the words that was used during his welcome for my new team.
	At the last oral questions, we talked about how the European Union would implement resolution 1803. I am sure that the House will be pleased that on 7 August a common position was established in respect of banking and a range of other issues relevant to 1803, which shows the EU's determination to implement its sanctions obligations in full—and even go beyond the requirements of that resolution. In respect of the Prime Minister's promise to pursue oil, gas and other sanctions on the Iranian regime, I assure the hon. Gentleman that that remains an important part of our agenda, both within the EU and internationally.

Israel

Anne Snelgrove: What recent assessment he has made of the durability of the ceasefire between Israel and Hamas.

David Miliband: The ceasefire agreement between Israel and Hamas has done much to reduce the violence. It has endured longer than many expected, but anyone who goes there will know that it remains fragile. We are concerned that it has not been accompanied by a significant improvement in the humanitarian situation in Gaza. There remains an urgent imperative to improve the access for humanitarian supplies, commercial goods and people.
	It is also vital, to ensure that the ceasefire holds, that all involved do their utmost to resolve outstanding issues, including the return of Corporal Shalit and tackling arms smuggling.

Anne Snelgrove: I saw for myself the terrible effect of the blockade during a visit to Gaza earlier this year. Thanks to the ceasefire, some humanitarian supplies are getting through, but is my right hon. Friend aware that mortar and rocket attacks on Israel are still occurring? Hamas has set up summer camps for young people to indoctrinate them against Israel and for paramilitary training. On the other hand, the blockade continues to stop economic—

Mr. Speaker: Order. Supplementary questions must be brief. The hon. Lady's material sounds more like an Adjournment debate.

David Miliband: My hon. Friend makes the important point that all sides have responsibilities in resolving the continuing crisis—not only the humanitarian crisis but the security crisis that has landed Israel with 6,000 rockets since 2005. I can assure her that we are absolutely determined to pursue both security for Israel and justice for the Palestinians. In the end, that will be possible only through the two-state solution that is so important for the middle east.

Richard Spring: Given the negative impact that rocket attacks from Gaza into Israel have had on public opinion about Israel, and the fact that they are therefore wholly counterproductive, what discussions has the Foreign Secretary had with Arab countries, notably Egypt, to secure a permanent cessation of rocket attacks for the reasons that he has spelled out?

David Miliband: I met the Egyptian Foreign Minister in New York two weeks ago and talked about Egypt's work to broker the ceasefire and to establish open crossings that do not allow the flow of arms but instead improve the economic situation in Gaza. The hon. Gentleman will know that this is an historic problem that has gone on for many decades and involves difficult security issues. However, I hope that he will also agree that in the end only a political solution will deliver the long-term change that is needed in Gaza and the west bank. In that context, the new talks that are being led by President Abbas to seek reconciliation between the two factions for the Palestinian people is an important step forward.

Ann Clwyd: May I say that the release of some of the Palestinian prisoners is to be welcomed, but nevertheless more than 40 elected Members of Parliament are still in jail without charge and without trial? When we were there with the Inter-Parliamentary Union at the end of July, we made it clear that that was totally unacceptable. They are elected Members of Parliament and should be either charged or released.

David Miliband: I agree completely with my right hon. Friend and would use exactly those words in respect of the 42, I think, elected MPs who have not been released. They should be either charged or released.

Stephen Crabb: Would the Foreign Secretary reaffirm that the ceasefire between Hamas and Israel does not amount to a formal renunciation of violence by Hamas, which has so far refused to budge one inch in the direction of the Quartet principles? Until the group signs up to peaceful engagement in line with those principles, there can be no seat at the negotiating table for Hamas.

David Miliband: Yes, that is an important point. The ceasefire is a significant step forward and it would be wrong to suggest that it has no importance, not least for people in Israel and for those who live in the misery that exists in Gaza. The elected Hamas Government in Gaza need to concern themselves with the economic and social conditions there and tackling the rocket attacks is one way of doing that. The hon. Gentleman is also right that the negotiations for a two-state solution can occur only between two sides that believe in a two-state solution and are willing to renounce violence in the way set out by the Quartet.

Louise Ellman: On 13 September, President Ahmadinejad told Ismail Haniya, the leader of Hamas, that Iran would continue to give practical support to Hamas until Israel was destroyed. Does my right hon. Friend agree that that ideological hatred is the real obstacle to peace?

David Miliband: My hon. Friend makes a very important point. That is the root cause of some of the problems in the middle east. Some of the comments made in the interview described by my hon. Friend and some of those made at the UN, to which I referred earlier, are completely beyond the bounds of civilised discussion. The other issues on which my hon. Friend has campaigned—namely the perpetuation of anti-Semitic propaganda, notably in schools and elsewhere, in parts of the Arab world—remain an enduring cause of some of the strife. Obviously there needs to be a political solution, but the sort of commitment that she has to mutual understanding and respect is at the heart of an enduring solution.

Afghanistan

James Brokenshire: If he will make a statement on trends in opium production in Afghanistan.

Bill Rammell: Opium production in Afghanistan is dropping. Compared with last year, the overall area under opium poppy cultivation this year is down by 19 per cent. and the number of poppy-free provinces is up from 13 to 18. However, production fell by only 6 per cent. due to higher yields. Those figures reflect the growing success of the Afghan Government's drug control strategy. As security and governance improve across the country, more areas are becoming poppy-free.

James Brokenshire: While heroin production has decreased across the whole of Afghanistan, the Minister will be aware that there has been a sharp increase in Helmand province, which now accounts for around 60 per cent. of the country's output. Some people describe Helmand as the world's biggest producer of illicit drugs, so will he explain what practical measures he is taking to ensure that heroin from Helmand does not get into the hands of drug pushers in this country?

Bill Rammell: The hon. Gentleman makes a good point. Progress is being made across Afghanistan, but there are particular problems in Helmand province. However, we must retain our comprehensive strategy for building institutions and developing alternative livelihoods for poppy farmers. Crucially, the strategy is about interdiction and law enforcement, and the proposed changes to NATO's operational plan, which would allow ISAF—international security assistance force—troops to do more against illegal narcotics operations in Afghanistan, can help us to move forward.

David Crausby: A surge in military operations in Iraq has clearly been effective, so does my hon. Friend accept that a surge in operations to prevent and destroy poppy production in Afghanistan is absolutely essential if we are to deny the warlords and the Taliban weapons and resources?

Bill Rammell: We need to be clear that we need a comprehensive strategy in Afghanistan. A military component is a crucial element of that, but there need to be the other ingredients as well. We certainly have a strong military presence in Afghanistan, but we also need others to make that contribution.

Keith Simpson: The Minister has talked about a comprehensive strategy. We all know that there have been divisions in the past between the Americans and ourselves about dealing with opium production, and further contradictory views have been expressed recently by both British and American officials. The UN Secretary-General has said that the security situation in Afghanistan has "deteriorated markedly" this year, it is reported that our ambassador in Kabul raised serious concerns about the direction of our strategy, and General Petraeus has said that there has clearly been a deterioration in the situation in Afghanistan. Given those views, will the Minister accept our long-standing calls for an immediate, high-level assessment of the state of Afghanistan and of British goals there? Will he commit the Government to making full, quarterly reports on the country and on what we are doing there?

Bill Rammell: May I say to the hon. Gentleman that we have a comprehensive strategy, and that we keep it under constant review to ensure that it is working? However, there is no difference between us and the US on this issue. I returned to foreign affairs two and a half days ago, and it is three and a half years since I previously held responsibility in this area, but I believe that there is now a stronger degree of co-ordination and determination to make progress on these issues. The terrain is difficult and extremely challenging, but we need that comprehensive strategy and the UK and US are determined to work at it together.

David Drew: The comments of the British commander in Afghanistan at the weekend certainly gave many of us food for thought. With that in mind, does the Minister agree that it is about time that we reassessed whether it is fair for the British to be leading not only in the Helmand campaign but also in drugs interdiction?

Bill Rammell: We need to be clear that our responsibility for drugs interdiction is one of the responsibilities that we have taken on, and that other G8 partners have taken on different responsibilities as part of a co-ordinated effort across the board. It is a difficult situation. We are making progress and I think that we can defeat the Taliban in their efforts to usurp the will of the Afghan people through their democratically elected Government, but it is not just a question of having a military strategy. What we need is a comprehensive military, economic and social development strategy.

Israel

Bob Russell: When he last had discussions with the Government of Israel on the establishment of settlements on Palestinian land.

David Miliband: I most recently raised this issue with the Government of Israel during the UN Security Council debate on the middle east last month. Israeli settlement building anywhere in the occupied Palestinian territories is illegal under international law. That includes settlements in both east Jerusalem and the west bank.
	We regularly press the Israeli Government, both in public and private, to implement an immediate freeze on all settlement activity, including so-called "natural growth". The Prime Minister made that clear during his speech to the Knesset on 21 July.

Bob Russell: I am grateful to the Secretary of State for that answer. The problem is that the Israeli Government are not listening. They are not acting and are, therefore, exacerbating the problems in the middle east. Is it not time that the British Government and other democracies told Israel that it must uphold United Nations resolutions, and with that in mind will the right hon. Gentleman meet a delegation from War on Want when it holds a mass lobby of Parliament on 19 November?

David Miliband: I am always happy to meet hon. Members or delegations, and either I or my hon. Friend the Minister of State will meet them on that date, depending on availability. When we talk of Israel implementing its commitments under UN resolutions, which I support, we must also call on all parties to implement all their commitments under the UN Security Council resolutions. It is important to say in respect of settlements that there are commitments under the US-brokered road map that must also be adhered to, and which are vital for the sort of confidence that negotiations need.

Richard Burden: As well as the illegality of the settlements themselves, does my right hon. Friend agree that one of the disturbing things that has happened recently is the upsurge in injuries as a result of settler attacks on Palestinians in the west bank? Although the Israeli Government cannot control their militants any better than the Palestinians can control their militants, is it not worrying that according to the UN between 80 and 90 per cent. of cases have their files closed by the Israeli authorities before prosecution?

David Miliband: Certainly, violence on any side is to be deplored. In the west bank at the moment, as I have seen for myself, there is a delicate process of building up the Palestinian security force, with a training centre in Jericho funded by the UK and the new move into Jenin, which has put Palestinian security forces on to the streets of Jenin, including its refugee camp, for the first time. That needs to be supported, and it needs to be supported by the Israel Defence Forces controlling areas where it still has a presence, and also by the Israeli Government. We certainly adhere to the principle that violence on any side is to be deplored.

Crispin Blunt: To my knowledge we have been regularly pressing the Israelis on the issue since 1995-96, when in the wake of Oslo it was clear that settlement building was continuing. Since Oslo the number of settlers has more than doubled. Every single day that a Palestinian is looking across at a settlement, the fact of Israel's settlement policy gainsays whatever else Israel says about seeking peace and a sustainable two-state solution. When will we actually do something about it?

David Miliband: The problem that the hon. Gentleman identifies is absolutely right and the diagnosis is shared on the Government side. What we do about it is to press the Israelis, both publicly and privately, and work with our partners to ensure that there is a robust peace process. I think the hon. Gentleman will agree that for seven years after January 2001 there was no political process at all. Alongside settlement building, the absence of a political process meant that there was nothing for Palestinians or Israelis who wanted a two-state solution to invest in. The political process that has been established since Annapolis—faltering as it is—none the less offers the only hope for a sustainable solution. It is that political process that we should invest in.

Tom Levitt: I very much welcome my right hon. Friend's answer to the question. Does he acknowledge that in the run-up to the recent parliamentary elections on the west bank it was the behaviour of the Israelis, through settlement policy and others, which led many Palestinian voters into the political arms of Hamas? Would it not be unfortunate if there were to be that same tendency between now and the presidential elections in the west bank and Gaza, and if the Israeli policy continued to have that effect?

David Miliband: It would be much worse than unfortunate. It really does torpedo the hopes of many of us for the two-state solution, which is the only solution in the region. President Abbas, as the directly elected leader of all the Palestinian people, is the right person to lead those negotiations. He is someone successive Israeli leaders have said they want to work with. The truth is that the moderates need to invest in each other—that is the only way in which they will make progress.

Iran

Stephen Hammond: If he will make a statement on Iran's nuclear programme.

Bill Rammell: Dr. Mohammad el-Baradei, director general of the International Atomic Energy Agency, reported on the state of Iran's nuclear programme on 15 September. Once again his report confirmed that Iran had failed to suspend enrichment-related activities and had made no progress on the transparency measures the Security Council and the IAEA have long called for, and that as a result of Iran's failure to engage, the IAEA had been unable to make any substantive progress on resolving the questions about studies with a possible military dimension—studies that it judges are of serious concern.

Stephen Hammond: The Minister will of course know that there is a UN ban on sales from Iran, and an EU ban on sales to Iran. However, given what he has just said about the possible military applications, and given the expansion of the nuclear programme, what are the Government doing to secure a UN ban on sales of arms to Iran?

Bill Rammell: We have taken the lead, through the European Union and the Security Council, in putting in place effective sanctions on Iran, and we will continue to make the case for improved sanctions. As the Foreign Secretary said, we very much want to take a twin-track strategy, in which we urge Iran to engage. There is a significant offer on the table following the EU3 plus three negotiating process, and I strongly urge the Iranians to engage in that process.

Tony Lloyd: Would my hon. Friend agree that, while he and the Foreign Secretary are absolutely right about the dangers that Iran poses to the region, and indeed to the whole world, it would be very helpful if the new Administration in Washington were prepared to hold a proper dialogue with Tehran? I mean a dialogue not without precondition—a dialogue in which we are determined to push the very important issues. Washington does matter, as it is the one voice that would make a real difference in Tehran.

Bill Rammell: Washington certainly matters, and Bill Burns's commitment to go to the Geneva talks is a positive step forward. Undoubtedly, Washington has to play a role, but we need a co-ordinated, concerted effort by all the international partners to make it very clear that a nuclear-engaged Iran is not the way forward. However, offers are on the table for diplomatic engagement with Iran. That is very much the path that we want Iran to take.

John Horam: How do the Government evaluate the role of Russia in relation to Iran's nuclear programme? Has the Minister noticed any change since the war in Georgia?

Bill Rammell: That is something that my right hon. Friend the Foreign Secretary recently discussed with the Russians. It is clear that they have supported, diplomatically, the efforts to ensure that the Iranians understand our position, and they have supported successive UN Security Council resolutions. Through dialogue, we will ensure that we continue to put across the argument to the Russians that they need to work with us on this crucial issue, as indeed they are doing.

Zimbabwe

Danny Alexander: If he will make a statement on the political situation in Zimbabwe.

David Miliband: My written ministerial statement to the House yesterday made our position clear. Zimbabwe's people want the agreement that was signed on paper to work in practice. That requires a Cabinet to be appointed without further delay that will reform Zimbabwe's economic management and the behaviour of its security forces. We continue to provide humanitarian relief to the Zimbabwean people to the tune of more than £50 million a year. We remain ready to support recovery when a new Government show commitment to reform.

Danny Alexander: I am grateful to the Foreign Secretary for that answer, and for his statement yesterday. Once again, President Mugabe is stalling plans to involve the Movement for Democratic Change in the Government of Zimbabwe. Does the Foreign Secretary think that Thabo Mbeki is still a credible mediator now that he is no longer in office, or does he agree that until there is a credible mediation process in place, Mugabe will simply use the lack of progress to cling on to power, to the detriment of the Zimbabwean people?

David Miliband: President Mbeki's role came from his presidency of the Southern African Development Community; obviously, his role has now changed. However, the responsibility is clearly on Mr. Mugabe. The agreement has been signed. It is sitting there waiting for implementation. Mr. Tsvangirai is ready to work with Mr. Mugabe on the distribution of Cabinet portfolios, and that is the key test now. An agreement has been made, but no Government have been formed. During that time, more misery has been caused to the people of Zimbabwe. The next step is absolutely clear; it is not for Mr. Mbeki or anybody else to take it, but Mr. Mugabe, and the world needs to hold him to account for that.

Tony Baldry: Given that Mugabe is yet to deliver on anything, why does the Foreign Secretary think that he will deliver now? The only reason why we have got so far is pressure from South Africa. The Foreign Secretary grimaces, but if it had not been for some of the intervention from South Africa, we would not have got this far. What are the UK Government doing together with the Government in Pretoria, if not with Mbeki, to ensure that pressure is maintained on Mugabe?

David Miliband: The greatest pressure is from the Zimbabwean people who voted for the Opposition. There is also pressure from the economic collapse that is happening in the country. In the end, the deal was struck not between the British Government and Mr. Mugabe, but between Mr. Tsvangirai and Mr. Mugabe, and it is his decision to engage in the agreement that is critical. South Africa remains an important partner: remember, it has 3 million Zimbabwean refugees in its country, so it has an overriding interest in tackling the problems in Zimbabwe, and we remain in close touch with the new South African authorities to try to ensure that the right pressure is applied from all sides, not only from South Africa, but from elsewhere in southern Africa.

Geoffrey Clifton-Brown: Is the Foreign Secretary aware that the United Nations Under-Secretary-General for Humanitarian Affairs estimates that by next spring up to 6 million Zimbabweans may be in need of food aid? What representations has the British Government made to the non-functioning Zimbabwe Government to allow NGOs and others who can build up proper food stocks to do so, so that those people do not suffer?

David Miliband: That is precisely the issue that the Secretary of State for International Development and I discussed with the Secretary-General of the UN in New York. The hon. Gentleman is right to say that the projections for famine are stark and clear. The UN is an important part of the process, but he is also right to say that the relaxation of the ban on NGOs is a critical part of the agreement that now needs to be adhered to.

Mark Francois: May I pursue the last point further with the Foreign Secretary? With the food crisis in Zimbabwe reaching very serious proportions and, as we have heard, a new Government still not formed, what specific plans—British, EU, Commonwealth or other—exist for a serious humanitarian relief effort, if the political crisis continues to escalate but the supply situation in Zimbabwe continues to deteriorate?

David Miliband: I hope the hon. Gentleman was not suggesting that the current programme, which delivers food through the World Food Programme to over 2 million people, is not serious. It is a very serious programme, which is already under way. The hon. Gentleman says the situation will get worse and he is right. That is why the World Food Programme needs to be in charge of a scaling up of the programme from 2 million to 5.3 or 5.4 million—that is the figure that I had, rather than the 6 million that the hon. Gentleman mentioned. None the less, that means a massive famine across the country, and the World Food Programme is in the key position to organise that effort. The UK will be a strong supporter of its work.

Afghanistan

Peter Bone: What his latest assessment is of the political situation in Afghanistan.

Bill Rammell: As the Prime Minister saw during his visit to Afghanistan in August, progress since 2001 has been significant. The Afghan people increasingly have a voice about their future through their representatives at both the local and the national level, but progress is fragile and the issues are challenging. There is no room for complacency. We are working with the Afghans and our allies to encourage greater political focus in advance of next year's elections, and the UK continues to support the Afghan Government in delivering a better future for their people.

Peter Bone: I thank the Minister for his response. Does he agree with Brigadier Carleton-Smith, commander of 16 Air Assault Brigade, who said:
	"If the Taliban were prepared to sit on the other side of the table and talk about political settlement, then that's precisely the sort of progress that concludes insurgencies like this"?

Bill Rammell: I certainly would not support dialogue with those who are committed to violence, but I would support Afghan efforts to reach out to those within the Taliban who are genuinely prepared to leave the path of violence and engage in the legitimate political process. That is a message which we need to put across forcefully.

Diane Abbott: What is the Government's response to commanders on the ground who are saying that the current war in Afghanistan cannot be won militarily?

Bill Rammell: I urge my hon. Friend to read very carefully the comments that have been made; I do not believe that that is an accurate description of them. I believe, and it is certainly the Government's view, that we can prevent the Taliban from usurping the legitimate will of the Afghan people through their democratically elected Government, but that will mean that we need a comprehensive strategy—the one that we have in place, which has a military dimension but has a social, economic and political one as well.

Bernard Jenkin: The Defence Committee visited Afghanistan this year as well as last year, and it was clear to us that everything in Afghanistan is worse this year than it was last year. When will the Government be realistic, as I believe Brigadier Carleton-Smith is being realistic? In view of what the Minister has just said, will he not endorse the invitation issued by the President of Afghanistan to Mullah Omar for talks? Unless the Taliban can be separated from al-Qaeda, they will fight alongside al-Qaeda. They are not the same as al-Qaeda, and there is no need for them to be part of al-Qaeda's effort.

Bill Rammell: First, as I said earlier, I do not believe that it is an accurate description to say that there has been no progress. To take one example, although there are further challenges, poppy cultivation in Afghanistan, as was endorsed by the UN, is down this year compared with last year. With regard to the Taliban, I reiterate what I said a moment ago. If individuals within the Taliban are prepared to renounce the path of violence, yes, we should talk to them, but that commitment needs to be made.

David Winnick: Although the original intervention was perfectly justified, British troops have now been involved in Afghanistan for longer than the duration of the second world war, so is it not necessary to make it perfectly clear that their presence there simply cannot be open-ended? We cannot be there for years to come.

Bill Rammell: We need to be clear that we have a responsibility to the Afghan people, but we also have a responsibility in our own interest. To turn the debate back to poppy cultivation, bearing in mind that 95 per cent. of heroin on our streets comes from Afghanistan, we have a vested interest in seeing this through. We certainly do want the Afghan authority to take ever greater responsibility so that the necessity for us to be there is diminished, but we need to maintain our commitment and responsibility.

Sammy Wilson: This week 100 soldiers from the Territorial Army have returned to Northern Ireland from Afghanistan, and will rightly be honoured by Belfast city council at the end of the month. But as the political situation in Afghanistan is still fragile, the Americans say that they need about three more battalions, and the outgoing British commander has said that the situation is still very fragile and the Taliban are still resilient, will the Minister comment on the likelihood of troops being withdrawn within the next three to five years? Or is it likely that soldiers from Northern Ireland and elsewhere will be going back to Afghanistan for further tours of duty?

Bill Rammell: First, I pay tribute to the hon. Gentleman's constituents, who are doing a superb job on behalf of this country. We have a commitment. We have a continuing presence, which we keep under review, but I will certainly not make arbitrary commitments about time scales over which there may or may not be a reduction in troop levels.

Jeremy Corbyn: British troops have now been in Afghanistan for longer than the duration of the second world war, and the Ministry of Defence is talking about keeping them there for 30 years. Does not the Minister agree that it is now time for a change of course? The war has already spread over into Pakistan, thousands are dying, and there is no military solution there. Does he not accept that there has to be a political solution that also involves the withdrawal of western troops from Afghanistan?

Bill Rammell: I say to my hon. Friend, who takes a serious interest in these issues, that we have not talked in terms of an exclusively military strategy—a point that I have tried to make repeatedly this afternoon—but we need to implement the strategy that we have in place. I strongly believe that it is the right strategy. It has a military component, but it has many other elements as well. It is the right strategy, and we need to ensure that we implement it and that it works.

Peter Tapsell: Now that our ambassador in Kabul and our senior combat commander in Helmand province have both confirmed the wisdom of the advice that I have been giving to Ministers—for a period almost longer than the second world war—that the war in Afghanistan is unwinnable, will Ministers now do their best to support the internal Afghan peace settlement negotiations that are taking place at this very moment in Mecca?

Bill Rammell: We certainly want to see progress made. With regard to the ambassador's comments, which were reported in  Le Canard enchaîné, I did not believe what I read in that newspaper when I was an undergraduate living in Paris, and I certainly do not believe it today. It is not an accurate description of the views of our ambassador or of the British Government. We need to make progress and that is what we are determined to do.

Female Circumcision

Linda Riordan: What recent reports he has received on the practice of female circumcision in other countries; and if he will make a statement.

Gillian Merron: The UK Government condemn female genital mutilation as an extreme violation of women's and girls' human rights—a violation to which the World Health Organisation estimates up to 140 million women and girls have been subjected. We work through international organisations to eradicate the practice, which is now a criminal offence in the UK.

Linda Riordan: I thank the Minister for that reply. At least 2 million girls are thought to be subjected to the barbaric practice of female circumcision every year. The process is painful, dangerous and extremely frightening; the girls are often held down and forcibly circumcised. Will the Minister confirm again that she will do everything that she can, working with the World Health Organisation and the United Nations, to put an end to that inhumane practice?

Gillian Merron: I certainly can confirm that. I congratulate my hon. Friend on being a long-standing campaigner against that abuse. Last year, the UK Government gave about £64 million to support the work of the UN agencies and the World Health Organisation in their commitment to stop female genital mutilation in one generation. That will be used to fund work with civil society and traditional, religious and political leaders, to help to change the attitudes of women as well as men, because that is what needs to happen.

Topical Questions

Eric Martlew: If he will make a statement on his departmental responsibilities.

David Miliband: My right hon. Friends the Prime Minister and the Secretary of State for International Development and I led a ministerial team for this year's UN General Assembly ministerial week. The Prime Minister's personal commitment contributed significantly to the success of the Secretary-General's high-level event on the millennium development goals. I took forward our work on several of our top-priority foreign policy issues, from Pakistan to Afghanistan to Burma. The Security Council agreed a new resolution on Iran, and I had useful discussions on Somalia, Sudan, the middle east peace process, Georgia and international peacekeeping.

Eric Martlew: During the summer I visited Romania, and was able to see the prosperity and hope that membership of the EU had brought to that country. Can my right hon. Friend tell me what progress is being made on the application from the Republic of Macedonia? It, too, could benefit from the prosperity that being a member of the EU would bring.

Caroline Flint: As my hon. Friend knows, Macedonia is an EU candidate country and has made real progress against the benchmarks this year. However, work still needs to be done to improve on the conduct of elections and to strengthen political dialogue and legislative processes. A progress report from the European Commission is due in November, and that will provide an important assessment. I understand that the Macedonian Deputy Prime Minister in charge of European integration is coming to London next week; I hope to have the time to meet him.

William Hague: May I, as shadow Foreign Secretary, join the tributes to the Ministers who have left the Front Bench, particularly the hon. Member for Pontypridd (Dr. Howells), who has gone, but whose disarmingly frank answers were a model to follow? We are not sure quite what the Foreign Secretary did over the recess to warrant the clear-out of his entire Commons team by the Prime Minister—but we can have a good guess.
	We welcome the new Ministers to the Front Bench. We welcome, too, the written statement that the Foreign Secretary made yesterday about Georgia and Russia. In that statement he noted, of course, that the talks on a future partnership agreement between Russia and the EU are still suspended. Will he set out what he thinks the criteria are for the resumption of those talks? Should they not include not only the implementation by Russia of the six points of the 12 August ceasefire plan, but the facilitation of the return of Georgian refugees to their homes in Abkhazia and South Ossetia? Would it not be inappropriate to resume those talks if Russia were, in effect, a party to ethnic cleansing?

David Miliband: I am grateful to the right hon. Gentleman for his kind words to my hon. Friends. My hon. Friend the Member for Pontypridd (Dr. Howells) is no longer here—

John Bercow: He is a great man.

David Miliband: He is indeed a great man. I will make sure that he hears the words of the right hon. Member for Richmond, Yorks (Mr. Hague).
	In respect of the Georgia-Russia issue, the right hon. Gentleman has raised two factors that are certainly two of the "criteria", to use his word, that we should use in deciding whether to re-engage on the partnership and co-operation agreement. He will know that an audit is under way of all EU-Russia relations, from the cultural and diplomatic right through to those that involve research, or other political issues. When that audit is complete, we will take a view in the round about the right way forward.

William Hague: Moving on from the main foreign policy crisis of the past two months to the pre-emption, I hope, of a future crisis, the Foreign Secretary gave a written answer yesterday saying that he had written to his EU colleagues to ask for greater EU focus on Bosnia-Herzegovina. Does he therefore share our alarm that after last week's Defence Ministers meeting, some of them said that there would now be a plan for the withdrawal of the remaining international troops from Bosnia? Will he go further than writing a letter, and say that in the view of Britain—given the current precarious position in Bosnia, the calls for the destruction of that state, and the efforts by Russia, in particular, to close down prematurely the office of the high representative—the withdrawal of international troops from Bosnia would be a great mistake, which would send the worst possible signal, and that this is a time for united strength, not for any sign of weakness?

David Miliband: It was precisely in the search for united strength that the Foreign Minister of the Czech Republic and I wrote to all our EU colleagues about this issue in July, following a meeting that I had with High Representative Lajcák, who is doing an excellent job in Bosnia in very difficult circumstances. The issue of the office of the high representative is a critical one. However, there is an agreement that that office should be closed when the commitments that all parties have made to it have been concluded and implemented in full. I can assure the right hon. Gentleman that it remains very much the policy of the British Government that the office of the high representative needs to be supported in the fulfilment of all its functions until such time as those commitments have been fulfilled.

David Clelland: The Foreign Secretary will be aware of the devastation caused to the Turks and Caicos Islands when hurricane Ike recently passed through the region. Is he aware that the situation continues to be grave, with electricity supplies and telecommunications disrupted and many public and private buildings in need of repair and restoration? Can he satisfy the House that everything possible has been done by the United Kingdom Government to help the Turks and Caicos Islands; and does he agree that in the circumstances it might be appropriate to suspend the current inquiry into the governance of the islands until normality is restored?

David Miliband: I am glad that my hon. Friend has raised the natural tragedy that has occurred in the Turks and Caicos Islands. He is right about the level of devastation, and he can be assured of our commitment to trying to help to remedy the situation. I am very wary of suspending the discussions on the political governance arrangements, because in the end it is precisely those arrangements that will give strength to the people of the Turks and Caicos islands themselves in responding to the problems that exist there. We want to support them, but we should be leery of suspending the reform of governance. Particular meetings may have to be rescheduled, but I would be sorry if the process were stopped.

Anne McIntosh: At this time of turmoil in the financial markets, we look to the European Union to give some guidance, particularly as it is a single market. How can the Foreign Secretary encourage our European partners to put aside potentially very narrow self-interest that could have huge implications for neighbouring countries, and urge them to act in the European interest?  [ Interruption . ]

David Miliband: I do not know whether it was one of the Members on the Conservative Front Bench or the hon. Member for Wellingborough (Mr. Bone) who just shouted out, "Fat chance"—but the case for co-ordinated European action has been more than demonstrated by the events of the past few weeks, which have made it clear that the interdependence of which my colleagues and I have spoken many times is a reality, not only economically but in other spheres. The Chancellor of the Exchequer is at the ECOFIN meeting today, and that is the most obvious place to reinforce the need for the co-ordination of which the hon. Lady speaks. It is also important to say that next week's European Council, which the Prime Minister and I will attend—[Hon. Members: "Together?"] Together. That Council, which would originally have focused on issues to do with the Lisbon treaty, will now be significantly devoted to the economic crisis and how Europe should respond to it.

Andy Reed: My right hon. Friend will be aware that the conflict in northern Uganda involving the Lord's Resistance Army has displaced more than 2 million people—not only that, but people are living in absolute fear. It has recently been suggested that aid agencies should work in the region. Are the Government taking steps to ensure that peace is finally brought to that area, and that aid gets through to those who most need it?

Gillian Merron: The UK Government remain committed to the success of the Juba peace process, which has already led to sustained peace, security and stability in northern Uganda, and a negotiated peace deal. The door remains open for the leader of the Lord's Resistance Army to sign the final peace agreement. The House will want to know that the UK has so far contributed about £750,000 to the Juba initiative fund to support the mediation process, and I can confirm that the Government have not provided aid directly to the Lord's Resistance Army.

Edward Davey: May I too welcome the Foreign Secretary's new team? On these Benches, we will particularly miss the hon. Member for East Renfrewshire (Mr. Murphy), with his qualities of soft power—he will need those north of the border, with his new ministerial responsibilities.
	On this summer's crisis in South Ossetia, does the Foreign Secretary recognise that some Members found the response of the Government—and indeed, of the Conservatives—in proposing fast-track membership of NATO for Georgia and Ukraine, deeply flawed and lacking any credibility? While the Government were right to criticise Russia in strong terms, does the right hon. Gentleman not realise that NATO is currently in no fit state to give out defence guarantees as if they were confetti? Is he not in danger of undermining NATO, instead of creating the wider diplomatic unity needed to stand up to Russia effectively?

David Miliband: I am sorry to hear that question from the hon. Gentleman, because the discussions and decisions about NATO membership took place in April at the Bucharest summit, rather than during the summer. As it happens, the President of Ukraine was in London yesterday to meet the Prime Minister and myself. Surely it is an important founding principle of this House that sovereign nations with democratic Governments should be able to make their own choices about which international organisations they belong to. The European Union and NATO have clear criteria for membership, and those criteria allow countries to apply. It would not be right to apply those principles with fear or favour. It must be right to respond to countries' democratic decisions in an open and engaged way.
	In respect of Georgia, the NATO-Georgia council established at the emergency NATO meeting was precisely designed to build up Georgia's capacity for its own armed forces and to build up co-operation with NATO. That seems a sensible and reasonable thing to do in light of the decisions that leaders made in April. A final decision on NATO membership can be made in due course. That is not the issue at the moment; the issue is Russian aggression into Georgia, and whether there should be co-operation between NATO and Georgia. I think that there should be.

Howard Stoate: My right hon. Friend will be aware of the case of my constituent, Mr. Patrick Malluzzo, who is currently serving a 10-year sentence in Kota central jail in Rajasthan, India for drug-trafficking offences. Can I ask my right hon. Friend to ensure that when Mr. Malluzzo's appeal eventually comes—he has now been waiting for more than two years—there is a British consular presence? His family and I, and Fair Trials International, have a number of concerns about the way in which his initial trial was conducted, as well as his subsequent treatment in prison. Will my right hon. Friend ensure that there is a consular presence at his appeal hearing when a time for it is finally agreed?

Bill Rammell: I know that my hon. Friend has taken an intense interest in that issue, and has followed it and lobbied on it strongly. We are giving consular assistance to Mr. Patrick Malluzzo and his family. It is not normal practice for us to attend hearings, but we look at matters on a case-by-case basis. I will consider the case when it comes forward, and I am happy to meet my hon. Friend to discuss his concerns.

Oliver Heald: Coming so close to the 40th anniversary of the crushing of the Prague spring by the Soviet Union, there was a deep sense of shock throughout Europe to see what happened in Georgia—Russian tanks on the streets of another country. There have been some reports that the Russian authorities were rather shocked by the response of the international community. What assessment has the Foreign Secretary made of that, and is he satisfied that he has made all— [ Interruption. ]

Mr. Speaker: Order. One supplementary question.

David Miliband: The international community has made its view most clear in its failure to follow the Russian lead on recognition of Abkhazia and South Ossetia. Two countries followed the Russian lead, and—ironically, given our earlier discussion—Hamas also recognised them, but otherwise the world has been united in refusing to recognise a country created on the basis of force. A clear signal has been given that it must be the rule of law that decides the future map of Europe and its neighbourhood, not force.

Sally Keeble: Could my right hon. Friend say what discussion he has had with the caretaker Government of Bangladesh, in particular about the human rights abuses and about support in the run-up to the forthcoming elections?

David Miliband: Yes. The elections are scheduled for 19 December. Since my visit to Bangladesh in February, I have been engaged at both official and ministerial level in ensuring that the elections are carried out in a way that brings credit to the country. The House will be pleased to know that the identity card system that has been introduced in Bangladesh to ensure that everyone has one vote, and not more than one vote, is immensely popular there, and will give women equal rights for the first time. On the human rights situation, which my hon. Friend also raised, there are concerns there. We certainly take up individual cases, as well as making the general point about the need for a democracy to be underpinned by the rule of law and respect for human rights.

Charlotte Atkins: What progress is being made in the EU on a trade agreement with central America, and what can be done to help central America use trade more effectively, both to eradicate poverty and to combat the impact of rising global food prices?

Gillian Merron: The EU has just completed its fourth session negotiations with central American countries on the association agreement in July. The latest session is ongoing and good progress has been made so far. The UK is supporting the EU's eagerness to push forward in the next session, particularly with regard to sustainable development, and environmental and political issues. On trade and aid, it is probably worth saying that trade is very much a powerful engine for growth, and for poverty reduction. Some 70 per cent. of UK Government aid for supporting trade development is delivered through various multilateral institutions, which enables poor people to trade their way out of poverty.

Lorely Burt: The Foreign Secretary will be aware of an article published in  Time magazine over the summer in which a former CIA officer claimed that the British territory of Diego Garcia had been used by the US to hold and interrogate terror suspects. What has the Foreign Secretary done proactively to investigate this disturbing claim? Does he now recognise that it is his responsibility to investigate this matter, and will he launch a full Government inquiry—

Mr. Speaker: Order. In the nicest possible way, I must say to the hon. Lady, and other Members of Parliament, that reading out a supplementary is not acceptable, and I will stop that practice immediately. The other thing is that the supplementary is too long, and we are running over time.

David Miliband: Briefly, Mr. Speaker, we addressed the issue directly in the investigation that we undertook of all allegations of rendition through Diego Garcia, following my statement in February. A written— [ Interruption. ] The hon. Member for Kingston and Surbiton (Mr. Davey) shakes his head, but every single allegation of a flight being used was sent to the United States, and my statement made it clear that there was no evidence of any flight, other than the two that I announced to the House.

David Taylor: Three months in, the joint United Nations-African Union peacekeeping mission in Darfur, UNAMID, is still well below planned strength, with UN members failing to provide 18 requested helicopters, despite a recent NGO report showing that Italy, Romania, Spain and the Czech Republic, among others, collectively have at least 70 suitable aircraft available. Will the Foreign Secretary take urgent steps to ensure that Britain and its European partners commit their full share of support to UNAMID operations, thereby protecting totally innocent civilians in Darfur from the murderous attacks to which they are currently being subjected?

David Miliband: My hon. Friend makes an important point. I share his frustration at the fact that the UNAMID force is now made up of 9,000 peacekeepers, not the 26,000 who were promised by the UN resolution. The issue was raised in New York with the Vice-President of Sudan, because it has important responsibilities. My hon. Friend is also right to say that the international community needs to deliver the helicopters. In that context, I am sure that he will be pleased that the Prime Minister's discussions with the President of Ukraine yesterday yielded a strong Ukrainian commitment to make a contribution in this area.

Stephen Ladyman: The ceasefire in Gaza is far from comprehensive. There are still sporadic missile attacks on Sderot and other Israeli communities, and in the past 24 hours Hamas has announced that it will not recognise the legitimacy of President Abbas after 8 January. In those circumstances, what more can we do to keep the peace process moving and try to shore up the ceasefire?

David Miliband: The most important thing that we can do is to work with our international partners, including President Abbas, the leader of the Palestinian Authority, to ensure that when there is a new Israeli Government, they follow through on the negotiating process that has been started. Secondly, we must ensure that during any transition in the United States, there is no halt to the peace process and that, certainly from 20 or 21 January when the new Government are installed in Washington, the middle east peace process has a high priority from day one, and does not have to wait until later in the Administration.

BILL PRESENTED

Banking

Mr. Chancellor of the Exchequer, supported by the Prime Minister, Secretary David Miliband, Secretary Jack Straw, Secretary Jacqui Smith, Mr. Secretary Hutton, Yvette Cooper, Stephen Timms, Angela Eagle and Ian Pearson, presented a Bill to make provision about banking: And the same was read the First time; and ordered to be read a Second time on Wednesday 8 October, and to be printed. Explanatory notes to be printed. [Bill 147].

Opposition Day
	 — 
	[18th Allotted Day]

Government's Fiscal Rules

Mr. Speaker: I inform the House that I have selected the amendment in the name of the Prime Minister.

Philip Hammond: I beg to move,
	That this House notes with concern the successive criticisms by the IMF, the EU and the OECD of the state of the UK's public finances; further notes that the Government are reviewing the fiscal rules and calls on the Government to announce the outcome of that review first to this House; further calls on the Government to clarify whether or not the Sustainable Investment rule will be met and to implement a full and independent review of the public finances, including off-balance sheet liabilities under the private finance initiative and public sector pension schemes; and further calls for the fiscal rules to be scrapped and replaced with a forward-looking fiscal framework with an independent mechanism for monitoring and assessing the sustainability of the Government's fiscal position.
	The global financial markets crisis is dominating the news agenda, and of course presents an immediate and pressing challenge to policy makers, first to maintain the liquidity of the banking system in the face of an unprecedented squeeze in the inter-bank market, and then to ensure that the conditions are right for its recapitalisation, not in order to facilitate a return to the lending practices of the past decade—practices that the Prime Minister has rightly categorised as belonging to the age of irresponsibility—but simply to allow the restoration of the normal workings of the wheels of commerce, through the supply of overdrafts and loan facilities to businesses large and small, the extension of consumer credit to households wishing to finance the purchase of capital goods, and the resuscitation of new mortgage lending, which the latest figures show has almost completely ceased.
	This is a national threat that requires a cross-party response. There will be time enough later to debate the causes and the failings of the past, and to identify the guilty and to hold them to account. The challenge now is to work together to support the tough decisions that may be necessary to preserve the banking system on which we all depend, and to protect the long-term interests of the taxpayer. We have made it clear that we will give the Government that support—not uncritically or unconditionally, but so that they know that any steps that are necessary to protect the integrity of our financial system will not be blocked or delayed by the kind of partisan posturing that we have seen in the United States Congress. That is our duty as a responsible Opposition.
	Beyond the immediate financial markets crisis and the paralysis in our banking system, however, the UK economy faces other, longer-term challenges that leave it less well prepared than many of its competitors to deal with an economic downturn and likely to recover more slowly from that downturn. Those problems will remain to be addressed long after the financial crisis is resolved.
	It is, and remains, our duty to hold this Government to account for leaving the nation so ill-prepared to face the challenges that the credit crunch has precipitated, and to deal with the weaknesses in our economy that it has so brutally exposed. It is our task to put forward an alternative framework that will ensure that future Governments do not repeat the mistakes of the past decade.
	The supply side problems that this Government claim to have identified—the skills gap, the productivity gap, the infrastructure deficit, and the need for reform in public services and in our welfare state—all remain largely unaddressed, so that during a decade in which the world's economy has grown at an unprecedented rate, the UK has slid down all the league tables of international competitiveness. Over that period, our economy has become more unbalanced, losing more than 1 million manufacturing jobs and coming to depend on financial and business services for more than half our economic growth since 1997. That leaves us more vulnerable and less resilient than our better balanced competitors.

Brian H Donohoe: Does the hon. Gentleman not remember that, under the previous Administration, unemployment in my constituency was virtually double what it is today? That was when the Tories were in power, not us. As a result of all that we have done in terms of jobs and the re-skilling of the work force in my constituency, the level of unemployment has reduced, and the level of employment has increased. Does he not understand that that is the reality of the life that we are living?

Philip Hammond: The hon. Gentleman might want to hold on for a few months before he starts talking about the level of unemployment in his constituency. I remind him that the previous Conservative Government were clearing up the economic mess and chaos created by the previous Labour Government—a scenario that looks likely to repeat itself yet again.

Jim Devine: In 1992, 13 years after the Conservatives came to power, inflation was at 12 per cent., interest rates were at 15 per cent., unemployment was at 3 million, and record numbers of homes were being repossessed. Was that a good financial strategy?

Philip Hammond: I remind the hon. Gentleman that in 1997 his party inherited an economy in which growth was rising strongly, unemployment was falling substantially and inflation was at less than half its current level. What have the Government done with that legacy? They have squandered it.

Oliver Heald: Does my hon. Friend share my concern about the situation of pension scheme members? Obviously, pension schemes have been badly hit by the falls in the stock market, and someone purchasing an annuity is in a very difficult situation. Has not the Government's £5 billion-a-year raid on the pension funds been masked to an extent by the rises in the stock market over recent years? Are we not now paying the price?

Philip Hammond: My hon. Friend is absolutely right. He draws attention to an important point, and I hope that the Chief Secretary is listening. Given what has happened in the stock markets over the past few weeks, people who are obliged to annuitise in the immediate future potentially face a lifetime of poverty or at least a substantially reduced expectation of income. Will she consider the challenge that that presents and see whether anything can be done immediately about it?

Mark Todd: Will the hon. Gentleman give way?

Philip Hammond: I will make a little progress first.
	The greatest structural weakness in our economy, however, is the absence of effective fiscal discipline, which, along with the explosion of consumer debt and the asset price bubble, has been the root cause of the age of irresponsibility, of which the Prime Minister has spoken so eloquently. We have been living beyond our means, both as a nation and individually, and now the day of reckoning is coming. As we look to rebuild our economy on a stable, sustainable basis for the future, it is clear that Governments of all political persuasions will have to embrace the practice, not merely the rhetoric, of fiscal discipline.
	Fiscal discipline was supposed to have been delivered by the Prime Minister's much-vaunted fiscal rules, but they have failed to protect us from this Government's fiscal irresponsibility. The Prime Minister said in 1998 that
	"our fiscal rules have been specifically designed to preclude party political manipulation of the public finances for electoral purposes."
	Tell that to the people of Crewe and Glasgow, East. Those rules failed to constrain fiscal policy during the years of growth, and that failure is directly responsible for Britain entering this period of economic turmoil with the largest fiscal deficit of any nation in the world except Egypt, Hungary and Pakistan. They did not stop this Government borrowing right the way through the top of a boom, at a time when many of our neighbours were running budget surpluses, paying off debt, and getting themselves leaner and fitter to confront whatever the future held for them—fixing their roofs while the sun shone. A third of OECD countries are now debt-free. At the end of an unprecedented period of world economic growth, however, the UK has net debt at a higher proportion of gross domestic product than in 1997—without taking account of the billions salted away through Enron-style accounting practices, off the balance sheet, out of sight and out of mind.
	It was not that the incoming Labour Government did not recognise the issue in 1997, or that they denied the importance of fiscal discipline. Far from it—the then Chancellor placed his fiscal rules at the heart of his economic strategy, alongside Bank of England independence, as one of the key building blocks in his claimed commitment to fiscal and economic stability. However, like the debt-fuelled boom, the fiscal rules have turned out to be an illusion. They failed. They did not do what a set of fiscal rules had to do to be credible: they did not prevent borrowing at the peak of a boom. On that there is now widespread consensus.
	The journey of the fiscal rules from robust central pillars to widely derided and discredited rhetorical devices has been long and painful. It has been like watching a car crash in slow motion. It began in 2005, when the then Chancellor avoided breaching the golden rule by the skin of his teeth with an eleventh-hour announcement of a reassessment of the timing of the economic cycle. From that point on, reputable commentators and publications have progressively ceased to refer to the fiscal rules as a serious measure of Government performance on the public finances. By 2007, a  Financial Times survey of independent economists found:
	"Almost none use the Chancellor's fiscal rules any more as an indication of the health of the public finances".
	The final nail in the coffin came in July this year, when the Government announced that the rules were "under review" specifically to create room for additional borrowing, tacitly admitting that these were good-time rules only. Now we simply await the formal burial of the body.
	The comprehensive failure of the fiscal rules leaves Britain's public finances extremely vulnerable, at the mercy of a weak and divided Government operating without effective fiscal constraints, guided by political pressure rather than fiscal discipline. It was precisely the traditional practice of loosening fiscal policy at the first sign of political trouble that the fiscal rules were supposed to avoid. They were intended to be a constraint on Government, a discipline that would ensure that something was put aside in the good years so that Government would be able to support families and businesses when more difficult times arrived. Instead, once again we are watching a Labour Government running out of money and being singled out by the International Monetary Fund for fiscal irresponsibility.

Henry Bellingham: My hon. Friend is explaining his case extremely cogently. He mentioned businesses. Does he agree that while the recent European package of £12 billion to help small businesses is welcome as far as it goes, the EU should be using this as an opportunity to reduce the amount of red tape and regulation being piled on small businesses and enterprise?

Philip Hammond: I believe that the £12 billion had already been committed, and that its provision is merely being brought forward. We await with interest, as I am sure do thousands of small businesses across the country, details of how the money will get from the press conference in Paris into their bank accounts. If it is real money, it will be very welcome, but my hon. Friend is right: red tape is a real cost of business, and reducing the burden of red tape is as much of a boost to business as reducing the taxes that businesses must pay.

Brian Binley: Will my hon. Friend give way?

Philip Hammond: I will happily give way to my hon. Friend, who is an expert on this matter.

Brian Binley: I think that my hon. Friend does me too much credit. Does he agree that, in truth, small business is in serious trouble, and that the Chancellor could do much more by attaching conditions to the support we are giving the banking sector—conditions such as treating small businesses fairly, ensuring that they are not lumbered with very heavy interest rates, and ensuring that the overdraft facilities on which many rely are not cut unnecessarily?

Philip Hammond: My hon. Friend has drawn attention to a crucial part of the mechanism by which the financial markets crisis, the credit squeeze in the banking sector, is transmitting itself to the real economy. Up and down the country small businesses are having overdraft facilities withdrawn, and those that can still obtain them are being asked to pay interest rates at what might be described as extortionate levels. My hon. Friend the Member for Tatton (Mr. Osborne) referred to this week's announcement that one of the big high street banks is charging 15.8 per cent. to some of its small business customers. There are real problems in the small business sector, and we are beginning to see the fallout from the financial crisis directly affecting that sector.

Adam Price: In these difficult times, does the shadow Chief Secretary welcome the moves made by the enterprise Minister in the Scottish Government and the economy Minister in the Welsh Assembly Government to cut business rates so as to provide at least some breathing space for the vital small business sector, which in many of our communities is the backbone of our economy?

Philip Hammond: Well, of course, at a time like this what Government should be doing is helping businesses and families under pressure. That brings us to the central point of this debate today: if the fiscal rules had not so comprehensively failed—if they had constrained Government policy so that we were putting something aside during the good years—then this Government would be able to intervene to help companies and families under the pressure they are feeling.
	Tomorrow, the Chancellor will deliver his Mais lecture at the Cass business school. According to widespread reports, he will use the occasion to
	"clear the way for sweeping aside the Government's self-imposed rules on public spending"
	using the credit crunch for cover, tacitly admitting that the Government have broken their own fiscal rules, and burying with a whimper, away from this place, the system that the Prime Minister announced with such great fanfare here just a decade ago.

Charles Walker: Does my hon. Friend think that while the Prime Minister is doing this he will accept and acknowledge that he was wrong to say that he had abolished the boom and bust cycle?

Philip Hammond: I doubt that the Prime Minister will acknowledge that, but I suspect that he is deeply regretting those words, not only because they will come back to haunt him politically, but because the message that he sent out for years that he had abolished boom and bust and that, therefore, there never would be a rainy day—with no need to put something aside or for consumers to prepare for the worst; they had only to look for the best—has in fact led to the precise behaviour that he himself now describes as "the age of irresponsibility", and he must reflect long and hard on where the responsibility for that lies.

Several hon. Members: rose —

Philip Hammond: I shall give way shortly.
	The abandonment of the centrepiece of the Government's economic policy, referred to by the Prime Minister in 2003 as
	"the basis on which I think people have seen this Government as competent",
	is undoubtedly a political humiliation for them, but it is also an opportunity for this country to put in place a more credible, sustainable and independent framework for fiscal discipline. Our purpose in calling this debate today is not merely to draw attention to the failure of the fiscal rules and the absence of fiscal discipline or to the contribution that that failure has made to the situation we are now in and the Government's lack of room for manoeuvre in responding to it. Our purpose is to look to the future and to put forward an alternative framework to try to ensure that we collectively never allow ourselves to do this again—to borrow through a boom, to spend money we have not got, to pile up debt we cannot afford and to mortgage our future and the future of our children with the borrowing today that will inevitably become the taxation of tomorrow.

Graham Stuart: Further to the comments of my hon. Friend the Member for Broxbourne (Mr. Walker), does my hon. Friend the shadow Chief Secretary believe that the Prime Minister's claim to have ended boom and bust contributed to the fact that people in this country cut their rate of saving at first in half and then just to a fraction of its level in 1997, leaving homes and families throughout this country in a much worse position to face the bust that is now coming at the end of the Brown boom?

Philip Hammond: My hon. Friend is absolutely right. The message that went out was that low interest rate easy credit would be with us for ever, and that it was safe to borrow far larger multiples of income and to draw equity from one's house in a way that, with the benefit of hindsight, was incredibly imprudent and ill-advised, and the Prime Minister will have to bear the responsibility for that message.
	Step one in developing an alternative framework to the discredited fiscal rules was to understand why the current fiscal rules so comprehensively failed to deliver, and step two was to analyse whether they could be fixed. The sustainable investment rule is the simpler of the two rules to deal with. It says that in every single year, net Government debt should remain below 40 per cent. of GDP. That is a rather unambitious target in the face of our rapidly ageing population and the Government's own long-term fiscal projections show that if we do nothing, public spending will rise simply because of the demographic profile. The target takes no account of the need to put money aside for the future, and it has simply been broken, with current net debt at 43.3 per cent. of GDP and set to rise, and, as important, the use of off-balance sheet financing to conceal billions of pounds of private finance initiative debt alone makes it meaningless. Worse, the Government's determination to avoid being seen to breach the rule for as long as possible has led to a hugely costly distortion in public procurement as more and more projects have been forced into PFI structures, not because risk is being genuinely transferred, but so that capital spending can be financed off-balance sheet.
	The golden rule says that, over the cycle as a whole, borrowing should fund only capital expenditure, with current spending paid for from tax receipts. That is a perfectly sensible proposition, but it has not been delivered.

Mark Todd: On a technical point, the hon. Gentleman refers to the definition of projects within PFI, but I think he recalls that the Office for National Statistics normally carries out the task of reviewing whether a project should be placed on-balance sheet or off-balance sheet. Is he questioning the judgment that has been exercised in that respect?

Philip Hammond: The hon. Gentleman will recall that the Government committed to bring a large amount of this PFI liability back on-balance sheet from this year and then, apparently for technical reasons, pushed things back by a year. It will now be next year that some, at least, of this stuff comes back on to the balance sheet. When we examine these large numbers—these large percentages of GDP—it is important to remember that we are seeing only part of the picture; another bit of the picture remains off the balance sheet at the moment.
	The golden rule has not been delivered on because, this Government have consistently overestimated since 2001, tax receipts and underestimated the deficit, because the Chancellor has been allowed to mark his own scorecard and, crucially, because measuring compliance with the rule depends on the precise dating of the economic cycle, and that can be known only after the event—sometimes long after the event. In other words, the rule is backward-looking, while any credible judgment of fiscal sustainability must be forward-looking.
	Mervyn King has observed:
	"If you change your view of what happened seven or eight years ago"—
	that is to say, in the dating of the economic cycle—
	"it doesn't change the underlying fiscal position".
	Yet, such an approach may fundamentally change the apparent performance against the golden rule. So the golden rule is flawed not only in its implementation; it is flawed in principle. The Prime Minister's fiscal rules have failed the practicality test, because just as no sensible set of fiscal rules would suggest that Government borrowing and net public debt should not rise at a time of economic slowdown, so no sensible fiscal rule would allow us to arrive at such a time with borrowing bumping up close to the ceiling, leaving no room for counter-cyclical responses to the economic downturn and no room to help hard-pressed families and businesses, never mind for any additional measures that may be necessary to deal with the financial sector crisis.
	We have a failed fiscal framework, and we urgently need a replacement for the discredited fiscal rules if we are not to see the broader macro-economic policy framework undermined and the battle to contain inflation compromised. The Governor of the Bank gave a warning to the Treasury Committee:
	"The long-term risk...is that a fiscal framework that is not perceived by financial markets to be credible does put upward pressure on inflation expectations because it undermines the market's belief in the credibility of both the monetary and the fiscal frameworks."
	The evidence of the failure of the fiscal rules is here for all to see. That empirical evidence is consistent with the emerging academic consensus against rules-based systems on the basis of the empirical observation that, in practice, rules either tend to be too loose to be effective or so inflexible that Governments break them. While it might be possible in theory to design a rule that suggested the right response in all circumstances, such a rule would inevitably be too complex to operate in practice. So after careful consideration and consultation, our preference is for institutional reform to entrench fiscal stability. Last week, my hon. Friend the shadow Chancellor put forward our proposals for a new fiscal responsibility framework, as part of our plan for a strong economy.
	The framework will be at the heart of our economic policy. Its starting point will be that Governments, like the rest of us, must live within their means, not only because economic stability requires it, but because intergenerational fairness requires it. That will ensure that collectively we never make the same mistakes again, and in future all British Governments will be forced to fix the roof while the sun is shining. They will have to acknowledge that Governments cannot abolish the economic cycle, whatever Chancellors might like to claim, and will be forced to put something aside for the rainy day that will periodically come around.
	For anybody who has not studied the detailed proposals—I am sure that the Chief Secretary has done so—I will spell out what the next Conservative Government will do, in the event that this Government have not already adopted our policy. First, we will scrap the discredited fiscal rules, which are neither use nor ornament and, with the benefit of hindsight, never were.
	Secondly, we will introduce a tough, new, forward-looking mandate for the public finances at the end of a forecast horizon, with falling debt as a percentage of GDP and a balanced current budget, after adjusting for the economic cycle. Thirdly, and crucially, for the first time in Britain we will create an independent body accountable to Parliament, the office of budget responsibility, to publish independent forecasts and to assess the performance of Government against the outcomes it has specified.

Bob Spink: Surely it is the job of Parliament to monitor and assess the Government's fiscal policies and performance? After all, Parliament has Select Committees and professional advisers to inform them. This solution is yet another quango of unelected, unaccountable people, and it is a bad policy. It is certainly not a Tory policy. Has the hon. Gentleman really thought this through?

Philip Hammond: If the hon. Gentleman will forgive me, I will decide what is a Tory policy, not him. I reject his criticism, although he is right in one respect. Parliament has to hold the Executive to account, and the office for budget responsibility will give it the tools to do so. The OBR will be answerable to Parliament, delivering independent forecasts and an assessment of the Government's Budget proposals. I shall explain how it will work.
	The OBR will be staffed by economists and tax experts, and it will focus exclusively on the medium and long-term sustainability of the public finances. At its inception, it will be tasked with a full independent audit of the nation's debt; a cleaning of the Augean stables; and a bringing back onto the balance sheet of all the dodgy accounting that this lot have hidden in nooks and crevices such as the private finance initiative, Network Rail and under-recognised depreciation on military equipment. That should appeal to a Prime Minister who I saw on the telly last night calling for more transparency—except that of course he was calling for it from someone else, not from his Government.
	Let me explain, for the benefit of the hon. Member for Castle Point (Bob Spink), how the OBR will monitor the health of the public finances and hold Governments to account on an ongoing basis. First, the Chancellor will set the mandate for the public finances. This will remain his responsibility, just as the inflation target is set by him within the monetary policy framework. Then, every year, in advance of the Budget, the OBR will present its fiscal forecast, which will include a judgment of the sustainability of the public finances against the mandate it has been given. It will also include the OBR's best independent estimate of the true scale of all future Government liabilities. The judgment will state how much fiscal loosening or tightening the OBR thinks is needed by the end of the forecast horizon in order for its central forecast to meet the Chancellor's mandate. Crucially, however, the mix of any tightening or loosening between tax revenues and spending—a political decision—will be explicitly outside the OBR's remit. That will remain the responsibility of the Chancellor of the day, who will deliver in his Budget his judgment of the required net loosening or tightening of fiscal policy against the backdrop of that OBR-published report. If for any reason he or she does not agree with the OBR judgment, he or she must explain why to Parliament.
	Finally, the decisions taken in the Budget would be taken into account in the OBR's next report and the OBR would comment on the likely medium and long-term fiscal consequences of any significant deviation from its recommendation.

Adrian Bailey: The hon. Gentleman does not seem to have covered this question: who will appoint the members of the OBR?

Philip Hammond: I can offer to send the hon. Gentleman a copy of our plan for a strong economy. Members of the OBR will be appointed by the Chancellor for a single term— [ Interruption. ] The Exchequer Secretary says, "Ticking his own box", but it will be like the Chancellor appointing the members of the Monetary Policy Committee. We will put in place a mechanism for scrutiny by the Select Committee on Treasury and by Parliament of appointments not only to the OBR but to the Monetary Policy Committee, enhancing and strengthening the independence of both institutions.
	We need a fresh start, a proper recognition of the extent of the nation's liabilities, a clear plan for dealing with them and a mechanism for holding Governments to account for irresponsible borrowing. There will be no more marking by the Chancellor of his own exam papers and no more backward-looking targets that cannot be determined until years after decisions are made. Instead, there will be a system that delivers a constraint throughout the cycle based on the independent assessment of the office for budget responsibility, holding the Government publicly to account for their performance. That will call time on the repeated fantasy forecasts of jam tomorrow that we have seen in successive Budgets from this Government, with hopelessly overestimated tax receipts justifying hopelessly unsustainable levels of spending.

Kelvin Hopkins: Like the hon. Member for Castle Point (Bob Spink), I think that another quango is surely being set up. Is it not the case that holding the Government to account is a job for Parliament? Would the hon. Member for Runnymede and Weybridge (Mr. Hammond) not also agree that when the European Union tries to interfere in our economic strategy policies, we object to that, too? We already have the Institute for Fiscal Studies, the Audit Commission and the National Institute of Economic and Social Research; a number of bodies look at the way in which Government finances work and how they operate. Surely it is the job of Parliament, using all that information, to keep the Government held to account.

Philip Hammond: The office of budget responsibility will give Parliament an official independent-of-Government report, a series of projections of the fiscal position and, crucially and unlike the Congressional Budget Office, policy recommendations that will allow Parliament to hold the Government to account. The next Conservative Government are committed to implementing that fiscal responsibility framework. The need is urgent and we would welcome it if the Government, who have already cherry-picked their way through our last year's conference announcements, adopted the key elements of this year's.
	The changes that I have reiterated and that my hon. Friend the Member for Tatton set out last week would give the UK the most credible and responsible fiscal policy framework in the world. Alongside the independent Bank of England—with the enhanced responsibilities that we have proposed, now included in the banking reform Bill, and the additional powers that we propose to give it under our debt responsibility mechanism to respond to the threat of excessive debt being created in the system as a whole—the UK will have the strongest, most independent and most credible fiscal and economic stability framework of any nation in the world.

Mark Todd: It is very kind of the hon. Gentleman to give way again. I simply want to remind him that his motion makes a brief reference to public sector pension schemes. Since he did not mention how that issue might be addressed, I should be very interested to hear what his approach would be.

Philip Hammond: The point about public sector pension schemes is that they represent another large, unrecognised liability that currently sits off the balance sheet. We need transparency in our public finances. The people of this country need to know in a transparent way the scale of their obligations to public sector pensioners who have already accrued those rights.
	The Prime Minister talks of the age of irresponsibility, and he is right. It was an age when the creation of credit was mistaken for the creation of wealth, when public sector spending was concealed off the balance sheet, and when future revenues were systematically overestimated to conceal the scale of deficits. The clear lesson of the credit-fuelled mirage of a boom and the reality of the bust that is following it is that there are no free lunches. Prosperity is built on hard work, not easy credit. We can rebuild Britain's economic future, but to do so we must rediscover, and then never again lose sight of, the fundamentals of a strong economy—sound money, fiscal discipline and living within our means. We must earn our keep rather than putting everything on the nation's credit card for our children and our children's children to pay. Just as our banks are rediscovering the hard way the value of traditional prudent banking practices, so the British Government have to rediscover the enduring truth that long-term prosperity is built on sustained fiscal and economic discipline, and not on the back of a debt-fuelled bubble.
	So let us hope that we do not have to wait for a new Government for that to happen. Let us hope that a chastened Chancellor, having finally buried his discredited fiscal rules, will soon come to this House to announce a new fiscal framework based not on rules, but on a new independent institution similar to the OBR that we are proposing. Critically, that institution should have powers to make policy recommendations so that this Parliament can hold Government to account. It can grow in stature to develop the strength and credibility of the independent Bank of England and become, in time, one of the twin pillars of independent oversight that will deliver long-term stability and freedom from short-term political manipulation to the management of Britain's economy.
	It is, of course, too late to fix the roof for the storm that is already blowing up around us, but we owe it to the country and to future generations to ensure that we live within our means and that the age of irresponsibility in Government is now buried for ever.

Bob Spink: On a point of order, Mr. Speaker. I understand from the House of Commons Library that the Department for Communities and Local Government has just announced that it will delay the English local government elections to coincide with the European elections on 4 June next year. I wonder whether we are going to have a statement from those on the Government Front Bench on this matter and whether we can have a debate on it.

Mr. Speaker: That is not a matter for me. I must deal with the business of the day.
	My apologies to the hon. Member for Runnymede and Weybridge (Mr. Hammond), but has he finished moving the motion?

Philip Hammond: I have, Mr. Speaker.

Mr. Speaker: Thank you. I call Yvette Cooper to move the amendment.

Yvette Cooper: Thank you, Mr. Speaker. I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:
	"notes that the purpose of the fiscal framework is to smooth the path of the economy in the short term, to secure sustainable public finances in the medium term and to ensure that spending and taxation impact fairly between generations; recognises the success of the framework over the past decade, reversing historical under-investment in the infrastructure of public services, reducing debt from 43 per cent. of GDP in 1997 to below 37 per cent. last year and allowing borrowing to increase this year in order to support the economy; welcomes the £4 billion of tax cuts helping families and businesses this year; further notes the turmoil in the world economy and financial markets; recognises that Government is rightly focused on the turbulence in the financial markets and helping families and businesses with the twin shocks of the credit crunch and high commodity prices; and welcomes the Government's commitment to take whatever steps are necessary to protect the stability of the financial system."
	This is the first Opposition day debate since the House returned after the events of the summer. Given the wider economic events that we have seen, it is perhaps a surprise that the Opposition have chosen to focus on the fiscal rules rather than on the overall events in the world economy. The House will have a chance on Thursday to discuss more widely the events in the economy, and we have also had yesterday's statement from the Chancellor.
	The fiscal position is of course affected by those major world events. The Chancellor's statement made it clear that we are continuing to see significant turbulence in the global financial markets, and there is also continuing pressure on financial institutions across the world. That pressure has been evident in Iceland today, and in other countries too.
	We have already provided support across the system, such as through the special liquidity scheme and the actions of the Bank of England, and we have also taken action on individual banks that have got into trouble—for example, in the cases of Bradford & Bingley and Northern Rock. It was unfortunate that Conservative Members opposed and continue to oppose the action on Bradford & Bingley and Northern Rock. Had we not stepped in to support those two institutions and to take action, there would have been massive consequences for the financial stability of the British banking system and serious problems for the economy, for the public finances and, in particular, pressure for individual savers across the country. It was right that we should step in to support them.
	As the Chancellor said yesterday, there has been considerable speculation about capital and the banking sector in recent days. In examining options for restoring stability to the banking sector, it is right that we look at every aspect—liquidity, capital and regulation—with other countries and, of course, with the financial sector itself. That process is continuing and we will update the House at the appropriate time.

Graham Stuart: Does the Chief Secretary now accept that liquidity rules were too loose in previous years, and that any changes made to those rules in future must ensure that they are not tightened at the wrong time?

Yvette Cooper: In fact, the action being taken by the Financial Services Authority is to look at the need for regulation on liquidity and not simply on solvency. Its report in the light of the events of last summer made that clear, and it is right that it should do so. We have needed to provide considerable additional liquidity support across the system. It is probably also right to say that there were not sufficient assessments of liquidity risks internationally and between countries, as well as of the work that has been done by the FSA. Members on both sides of the House will recognise that events in the world financial markets have the potential to make a significant impact on the world economy, not just for the next few months but in many ways for years to come.
	In the circumstances, it is perhaps bizarre, and certainly irresponsible, for Opposition Members to try to pretend that the world economic events we are witnessing are simply a result of UK Government borrowing. In a recent interview, the shadow Chancellor said:
	"The causes of the problem are not the financial markets."
	The hon. Member for Runnymede and Weybridge (Mr. Hammond) has just told the House that lack of fiscal discipline is the root cause of the problems we face. That is economic illiteracy. Forget sub-prime lending in the US mortgage markets; forget the collapse of Lehman Brothers or the hugely complex bundling of toxic assets from the US; and forget the volatility in the money markets or the responsibility of international bankers. According to Opposition Members, the problem in the international markets is simply the level of UK Government borrowing and debt. I have to say that that view is utterly irresponsible and if Opposition Members do not understand the problem, they cannot be trusted to take the right decisions on how we deal with it and how we solve it to go forward.

Kenneth Clarke: If the right hon. Lady looks up the last three Budget debates, she will find that I always pointed out that the level of growth we were still enjoying was sustained by a bubble of Government and household debt, and that it was unsustainable. She will see that the reply of Ministers was to treat that with total disdain. Indeed, they claimed credit for the prosperity that was flowing from the boom, which was the product of their own remarkable economic policies. They denied the need to take action against such things as 140 per cent. lending on the value of houses or six times earnings when people certified their own earnings. They took credit for the boom, but they never saw the bust coming and circumstances in the UK are as bad as they are in the United States because of the Government's complacency.

Yvette Cooper: I have to point out to the hon. Gentleman—[Hon. Members: "Right hon."] —the right hon. Gentleman—[Hon. Members: "And learned".] —the right hon. learned and hugely fantastic Gentleman. I have to point out that in the 11 and a half years since he was Chancellor of the Exchequer, a lot of things have changed in Britain. In particular, our country was bottom of the G7 when it came to national income per head of population when he left office, but it is now the second in the G7 as a result of decisions that the Government took and the investment and economic stability that we experienced. We face significant world economic problems as a result of the dodgy lending that started in the US mortgage markets, the bundling of assets round the world and back again, and a lack of understanding of where risks lay, not just in the banking sector but among credit rating agencies and regulators.

Oliver Heald: Will the Minister give way?

Yvette Cooper: I am conscious of the fact that the debate is on fiscal rules, and I am trying to get on to the subject, but I give way to the hon. Gentleman.

Oliver Heald: The Chancellor yesterday told us that a number of building societies had unsustainable business models, and now had to be bailed out. Why was that allowed to happen? Why did not the Government, or a regulator in Britain, do anything about it? Why is the OECD saying that we have over-borrowed? Surely the Government have made some mistakes. Can the Minister not point to just one mistake that they have made?

Yvette Cooper: The hon. Gentleman misunderstands the issues to do with the economy, either deliberately or otherwise. He is confusing different kinds of borrowing and different kinds of debt. I understand that he has a political interest in doing so. He simply wants to muddy the waters and pretend that the private-sector credit crunch is somehow the result of public-sector debt. That is economic illiteracy, and it is simply not the case. The problem is not simply inexperience on the part of the Opposition. I do not think that their misjudgments in the cases of Northern Rock or Bradford & Bingley are simply the result of inexperience; opportunism and ideology are also involved. They want to claim that market problems are all the result of failure on the part of the Government, but that blinds them to the fact that sometimes we need Governments to step in to deal with the failure of markets, just as this Government did in the cases of Bradford & Bingley and Northern Rock. The hon. Gentleman's party repeatedly opposed our doing so, despite the serious risks that might have resulted for the financial system and the economy.

Bernard Jenkin: The right hon. Lady said that the Government would take action at the appropriate time, but a growing number of people are beginning to ask, "When is the appropriate time?" Are we just waiting for events to take hold of the agenda, while asset prices carry on falling, because the banks remain incapable of resuming normal business? Is not the urgent priority to recapitalise the banks? That will not happen on its own. It will require some form of Government intervention. When is the appropriate time? When will the Government be in a position to make an announcement?

Yvette Cooper: As the Chancellor said yesterday, we are, and have been, looking at a wide range of options for support of the banking system, and we will continue to do so. We have rightly already taken action across the board with the special liquidity scheme, and are dealing with particular pressures that arise. When we think that further action is needed and further measures must be introduced, we will say so, but it is irresponsible for people to speculate on the pros and cons of particular measures. It is right that we should take measured judgments and do the right thing to support the markets, given the instability and turbulence that we have seen.

Kelvin Hopkins: My right hon. Friend is quite right to say that at times of great crisis, the Government should take a major role in the economy and in the financial sector. Does she agree that one great success has been the nationalisation of Northern Rock—so much so that people cannot make new deposits, as it has ceased to take them? People on television are saying, "I want to put my money into a publicly owned bank because it is secure." Would it not be wise to spread nationalisation across the whole banking sector?

Yvette Cooper: Certainly, when I was first appointed to the Treasury at the beginning of the year, I did not expect that the first parliamentary Act that I would take through the House would nationalise Northern Rock. I think that it was the right decision to take. It would have led to considerable financial instability if we had not taken it, and that would have jeopardised confidence right across the banking system. It was the right thing to do. Faced with the unprecedented events that we have seen right across the globe, Governments have had to be prepared to take unprecedented action. That is the right thing to do under the circumstances.
	The debate is about the fiscal framework and I shall make a few points about that. Before 1997, there was no fiscal framework in place at all. Decisions were taken from Budget to Budget according to no clear and consistent approach. To the extent that principles were set to guide fiscal policy, they tended to change from one year to another. In 1992, the objective was a balanced Budget over the medium term. In 1993, the proposal was to move back towards balance over the medium term and borrow no more than net capital spend. In 1994, as the right hon. and learned Member for Rushcliffe (Mr. Clarke) will remember, the position changed again and there was no reference to borrowing. Such change from one year to another provided fiscal instability that was bad for the markets, as well as for the approach to the public finances.
	In 1997, we introduced a new fiscal framework and legislated for the code for fiscal stability, based on the five principles of transparency, stability, responsibility, fairness and efficiency. Within it we set two fiscal rules to cover borrowing for investment and the level of debt. The consequence of that framework is that between 1997 and 2007, borrowing peaked at just 3.3 per cent. and ran at an average of only 1 per cent. Compare that to the previous 10 years, when borrowing peaked at 7.8 per cent. of GDP and averaged 3.1 per cent., and the 10 years before that, when borrowing peaked at 5.1 per cent. and averaged 3.6 per cent. Over the previous two economic cycles, average borrowing was more than three times as high as it was over the last economic cycle.

Philip Hammond: So if the fiscal rules are so effective, can the right hon. Lady confirm that they are not about to be junked?

Yvette Cooper: As I am due to say, we will set out the position on the fiscal framework at the pre-Budget report, as the my right hon. Friend the Chancellor has already said. It is worth recognising again the impact that the fiscal framework has had. The discipline imposed on the public finances by the framework has seen debt cut from 43.3 per cent. in 1996-97 to 36.6 per cent. in 2006-07. Debt in the UK is lower than in every country in the G7 bar Canada, so we are the second lowest in the G7 in terms of our public debt, and it is lower than the EU average as well. That is precisely why we can borrow more now, and why it is right to borrow more now in order to get our economy through the tougher times ahead.

Adam Price: I am not sure whether I suffer from the economic illiteracy to which the right hon. Lady so often refers, but perhaps she could help me out. As  The Times editorial pointed out yesterday, most independent commentators are predicting for the financial year beginning 2010 borrowing between £90 billion and £100 billion. Even the Institute for Fiscal Studies is quoting a figure of £60 billion, which is twice the figure that the Treasury is still maintaining. Surely the collapse in corporate tax receipts, which is an inevitable outcome of problems in the financial services sector, should be factored in, or is there something that I do not understand.

Yvette Cooper: The hon. Gentleman is right to say that the economy has an impact on the public finances, so, for example, the reduction in receipts from stamp duty or from the financial sector will, of course, have an impact on tax revenues this year. We will set out the next forecast for borrowing and for the public finances at the pre-Budget report. As he knows, we do so twice a year as part of the Budget and as part of the pre-Budget report. That is the normal practice for reporting to the House and for ensuring that we have appropriate forecasting and fiscal stability in place.
	It is worth recognising, too, that the fiscal framework has protected public investment. Under the previous Government public investment reached a low of just 0.3 per cent. of GDP in 1988. As many of us know from our constituencies, that left a legacy of decaying public services and infrastructure. I remember that on one of my first visits to a primary school in my constituency, staff showed me where they put the buckets to catch the leaks from the Victorian roof, and I remember talking to the residents of one of the council estates in Pontefract, where they showed me the metal windows that rattled and the tiles that had blown off the roof—part of the £19 billion backlog of repairs and maintenance to Britain's council houses.
	The Conservative party did not fix the school roofs, the council house roofs or the hospital roofs. Under this Government, investment has grown by more than three times the 1997 level to 2.2 per cent. of GDP this year, and that sustained investment has allowed us to invest in the council homes, new hospitals, schools and transport infrastructure that we badly need. That is not just about mending the roof in the sunshine; it is about being still up there mending the roofs through rain, wind and stormy weather as well.

Graham Stuart: Will the Chief Secretary tell the House whether borrowing today is lower or higher than the borrowing level that she inherited when the Government came to power in 1997?

Yvette Cooper: It is important that we should increase borrowing this year as a result of the need to support the economy in difficult times, and it is right to do that. Opposition Members who call for cuts in borrowing when the economy is under such pressure from international problems frankly misunderstand the nature of the economic pressures that we face and the serious problems that it would cause for the hon. Gentleman's constituents if we were to cut borrowing at such a time in the way that he seems to be advocating.
	We have said clearly and repeatedly that the fiscal rules should be reviewed at the end of the economic cycle. Most commentators believe that the cycle ended in 2006, and we will provide detailed analysis of the fiscal position in the pre-Budget report. But as I have made clear, it is right to increase borrowing this year and next to respond to the economic shocks that we have faced. These are unparalleled in scope and scale because we have had the commodity price shock and the credit crunch at the same time. Who would have thought that the US Government would need to step in and end up backing half the mortgage assets in America through Fannie Mae and Freddie Mac. That alone is the equivalent to the national income of France and Italy put together.

William Cash: The Chief Secretary has just referred to debt and mentioned the figure for 2006-07 as being 36 per cent. In fact, on 30 September, the Office for National Statistics, which is now independent, issued its own assessment, and it says that the amount in question is a minimum of 43 per cent. and that if Northern Rock is included, which is about to be rerouted under new rules, at the end of 2007, it would be 46 per cent. Is not the right hon. Lady's estimate not out by something of the order of 10 per cent.?

Yvette Cooper: As I have made clear, it is right that we should take unprecedented action to support the financial stability of the economy. We have done so with Northern Rock, and the ONS has made it clear that it is right to look at public sector borrowing and public sector debt, including Northern Rock, but also separately from Northern Rock. All sensible economic commentators have done exactly the same. The position of a temporary nationalised bank, which will be returned to the private sector with the assets that it has to back that lending, is clearly very different from the kind of current expenditure that we deal with in public services on a day-to-day basis. If the hon. Gentleman is arguing that that should be treated differently, again, he misunderstands the economic consequences.
	The hon. Member for Runnymede and Weybridge took some time to present to us what he said would be his alternative framework, and he claimed that it would be the most credible and responsible in the entire world. That is simply not true. The Opposition's proposals are far from clear. They have proposed an office for budget responsibility to apply a mandate. The trouble is that they have not been clear about what that mandate would be. It is not clear whether this is about a fixed end-of-forecast period or a rolling end-of-forecast period, and that makes a huge difference. It is not clear whether this means borrowing goes up or down or that debt goes up or down. The mandate that they have set out could mean any of those things. Either the office for budget responsibility will have an awful lot of power to decide what in practice fiscal policy should be, or it will be extremely confused. I suspect that the answer might be the latter, because it is hard to understand what Conservative Members are calling for. They have said that they want to share the proceeds of growth, but also that that means simply sticking to the Government's spending plans, which their leader has repeatedly called "very tough". They say that they want to rein in borrowing—they used the phrase repeatedly last week—yet at the same time they say that they want to cut taxes and increase spending.
	If we consider the Conservatives' pronouncements of even the past seven days, we see that they have been arguing for a discretionary fiscal loosening to the tune of tens of billions of pounds, which would come in addition to the consequences of the current economic circumstances on the public finances. Only last week, the shadow Chancellor published a document that included tax cuts for millionaires' estates, which would cost £2 billion; ending the so-called couple penalty, which would cost £3 billion; measures on stamp duty that would cost £400 million; a council tax proposal, which would cost a further £1 billion; high-speed rail links, which would cost £1 billion a year; 4,000 extra health visitors; and 1,000 new academies. However, the number of identified ways in which the Tories would cut spending or cut borrowing was zero.
	Within 24 hours of proposing an office of budget responsibility, the party of the hon. Member for Runnymede and Weybridge had spent, we reckon, an extra £200 million an hour in increased borrowing on top of what is happening at the moment. So much for budget responsibility. The Leader of the Opposition and the shadow Chancellor have been keen to tell us all about their undergraduate education in economics. However, even with that education they cannot see that their sums just do not add up. Such fiscal irresponsibility would be bad for the economy and the markets.

Kelvin Hopkins: I agree with the tenor of what my right hon. Friend is saying. If there comes a choice between a serious rise in unemployment and a rigid, formulaic approach to the fiscal stance, will she make sure that unemployment—and not the fiscal stance—are her priority?

Yvette Cooper: We are clear about the need to support jobs in the economy and it is important to do so. It is also important that we run sound public finances, and that is what we have done and will continue to do. That includes being able to increase borrowing this year, exactly because we have cut debt in the past 10 years as a result of the decisions that we have made. It is because we have one of the lowest levels of public sector debt in the G7 that we are able to increase borrowing this year, and that is the right thing to do to support the economy.
	I say to Conservative Members that to cut borrowing this year and next, as the hon. Member for Runnymede and Weybridge seemed to suggest, would simply be irresponsible. While private sector borrowing is under such pressure, it is right that the public sector take some of the strain to support the economy through the difficult period.

Philip Hammond: I just want to nail that one. If the Minister checks  Hansard tomorrow, she will see that I specifically said that no sensible set of fiscal rules would suggest reducing borrowing at this point of the cycle.

Yvette Cooper: The hon. Gentleman may wish to make that point to his party leader, who has continually called for borrowing to be reined in and reduced, at a time when it would irresponsible to do so. Perhaps Conservative Front Benchers should get their own house in order and their story straight about what they think about borrowing. They call for a reduction in borrowing, but at the same time they call for big increases in tax cuts and big increases in spending. It does not stack up. The hon. Gentleman may want to put forward a sensible position, but he ought to persuade the rest of his party's Front Benchers.
	Sensible Governments across the world are increasing borrowing to support the economy this year; it is right, then, to bring borrowing down to ensure that public finances remain in a responsible and sound position. We are cutting tax by £4 billion to support the economy this year. We are freezing duty below inflation, increasing tax allowances and tax credits and providing the winter fuel allowance to pensioners. That also means fiscal discipline on public spending in the short and medium terms—being prepared to cut waste, improve efficiency and take tough decisions about priorities.
	In the end, we have to take sensible, serious decisions about fiscal policy just as we need to take sensible and serious decisions about financial stability. That requires serious judgment and a recognition of the cause of the problems and of how we need to respond. The opportunism of Conservative Members, along with their inexperience and, ultimately, ideology and hostility to the role of Government at a time when it may well be critical to support the financial stability of the system, mean that they still do not have the judgment to get the issues right.

Vincent Cable: The Conservative motion seems eminently sensible, and I am perfectly happy to support it, although the Conservative spokesman somewhat spoilt it with an unnecessary political rant. However, I was worried not by that—we always get that on an Opposition day—but by the dogmatic certainty with which he presented his alternative. Setting fiscal frameworks is very difficult, as experience all over the world teaches us. One can either have a very rigid structure such as the European Union's Maastricht rules, which are inflexible and pose all kinds of problems about how to enforce them, or a very loose structure that is more like the American model of politically driven fiscal policy, but with independent scrutiny. As I understand it, the Conservatives would like to move towards the American model. However, the problem with that system, as the Bush Administration have demonstrated, is that it can lead to extreme fiscal incontinence, with enormous deficits that make our Government look positively miserly. The structure does not fundamentally change the nature of the policy.

Philip Hammond: There is a crucial difference, which I thought that I had drawn out. The Congressional Budget Office is barred from making policy recommendations, whereas our office for budget responsibility would be charged with making such recommendations.

Vincent Cable: It is not making the recommendations but following them through that is the politically difficult bit. I accept that there is a slight difference between the Conservative proposal and the American system, but it is open to exactly the same objections.
	The Government's problem with their fiscal framework is that it was not clear from the outset whether it was a set of rules or vague guidelines—it is gradually degenerating from the first to the second. The other problem—this is where the Conservatives are right—is that there has never been a proper system of independent assessment. I have said on many occasions that if I could claim intellectual property royalties on soundbites, I would be very rich as a result of the flows coming from the Conservative Benches. I remember standing here five years ago and talking about the Government marking their own exam papers and the need for a fiscal Ofsted, which is what the Conservatives are now talking about.
	As regards the precise structure that the Conservatives propose, I share the reservations expressed by the hon. Member for Castle Point (Bob Spink), who is no longer here, and by the hon. Member for Luton, North (Kelvin Hopkins) as to why it is necessary to set up a quango of this kind. The National Audit Office is the obvious body to carry out such independent scrutiny. It would perhaps need reinforcing with a few more technical staff, but it has the great advantage of independence and respect, and it connects Parliament with the process through the Public Accounts Committee. Surely, if we are to have a proper independent system of auditing fiscal policy while retaining democratic accountability, that is the way to do it. Although I entirely agree with the Conservatives that we need an independent structure, the quango approach would be completely the wrong way of achieving it.

William Cash: I have listened to what the hon. Gentleman has said not only today but over a long period, and he often hits the nail on the head. He just referred to the inflexibility of the Maastricht system. As he knows, there are legal complexities and it does not work—for example, in the case of the stability and growth pact. Is the Liberal party now reviewing its commitment to the one-size-fits-all policy that comes from the European Union?

Vincent Cable: We have said on many occasions that the Maastricht approach needs to be developed. The system of imposing fines on countries that deviate from targets is clearly not practical in a world of sovereign states, and I would certainly not defend the system in its present form.

Kelvin Hopkins: There are reports that some of the southern European members of the eurozone will find it very hard to stay within it. Apparently, Italy is having to introduce a premium on interest on Government borrowing. Is it not the case that the eurozone is on the verge of break-up, let alone that we need to choose new rules that might work?

Vincent Cable: Since everybody is queuing up to have a go at the European Union, I must point out that despite all the predictions—including those of the two hon. Members who have just intervened—the eurozone still exists and has stayed together. Almost all the Governments involved have stayed pretty close to the 3 per cent. guideline, although there have been some breaches. This is not a debate about the European Union, however.
	The question raised by the Opposition motion is whether the Government have observed their own fiscal rules—the golden rule and the rule on sustainable investment. On the first, we simply do not know, because we have not had an independent assessment of the cycle, so we are having a pointless debate about whether the test has been met. It seems likely that the test has not been met, because independent bodies such as the Institute for Fiscal Studies and the National Institute of Economic and Social Research have estimated that during the past five years the Government have been running a structural deficit of £5 billion to £10 billion. I think that that is what the hon. Member for Runnymede and Weybridge means when he talks about the roof not being mended. There has been a persistent and substantial—we are talking about 0.5 per cent. of GDP, which is not mega—structural deficit that has remained year after year without being corrected. Any system that does not acknowledge that failing, and that does not have a mechanism built in to acknowledge and correct it, is clearly not working well.
	The second rule, on sustainable investment, will be broken, and the Government are clearly gearing themselves up to tell us that it will be broken. It is worth breaking down the reasons, because the sustainable investment rule is being broken for a mixture of good and bad reasons. One of the bad reasons is the cumulative effect of all the structural deficits. The amount of £5 billion to £10 billion a year over five years adds up to a substantial sum, which all adds to Government debt. That is not acceptable policy, but there are other respects in which public debt is increasing for understandable reasons. We want good public investment that earns a decent social return and ultimately repays the taxpayer. The purpose of having a public investment rule is not to choke off sensible public investment.
	The most important reason why the rule has been broken relates to asset acquisitions. Two banks have been nationalised—Northern Rock and more recently the £30 billion for Bradford & Bingley. I am not sure how the £200 billion liquidity facility is accounted for in the public rules, but perhaps we will have an explanation of that. Later this week, if all the rumours in the press are correct, we will have a rescue plan for the banks involving recapitalisation that could involve £30 billion or £50 billion—who knows? On that point, the Conservatives would do well not to be too self-righteous because they—and we—have argued for that facility, which will add very substantially to Government public debt.
	Asset transfers are, of course, completely different from cumulative structural deficits. They are a different economic animal, and they need to be presented quite separately. The fact that the investment rule is being broken on account of nationalisation is completely different in character from where it is being broken because of cumulative structural deficits over time. The two concepts need to be presented and analysed separately.
	On where we go from here, I agree with quite a lot of what the hon. Member for Runnymede and Weybridge has said. I wish that he had not presented his argument in such a completely inflexible and rigid way, however. I think that he said that he disagreed with the golden rule, but he defined a hypothetical Conservative Government's objective as being the same as the golden rule, did he not? He referred to balancing the current Budget over the cycle. That is what the golden rule is, and the hon. Gentleman stated that that is what a Conservative Government would aim to do, and I am not quite sure what is different. The idea is clearly forward-looking, as it has to be, but the objective is the same—it is a sensible objective, but it is the same as the one that the current Government aspire to. The matter will be extremely difficult, which is what worries me about the hon. Gentleman's rather dogmatic way of presenting it. It is all very well to use the phrase "forward-looking", but none of us can predict the future.
	I remember arguing strongly that over-borrowing and debt in the private sector would lead to the sort of recession that we are now in. I seem to remember that Conservatives, as well as Ministers, scoffed at that analysis. We cannot predict the future—none of us can—so a forward-looking measure of the Budget is open to an enormous amount of uncertainty and risk for any future Government, just as it is for the present one. The approach is sensible, but let us not be over-confident that the rule can be met. There will be an enormous increase in the budget deficit this year, partly because of structural factors and partly for the entirely justified reason of the workings of the stabilisers—the fall in income tax, corporation tax and national insurance. That must be allowed to happen; indeed, it would be foolish to stop it happening.
	The second element in forward-looking fiscal policy is the investment rule. Again, I am not sure how the Conservatives would deal with that. The Conservative spokesman is quite right that the investment rule is important for two reasons: first, because we have to protect future generations from over-borrowing; and, secondly, because the Government need to be careful about their borrowing due to the effect on bond markets and yields and the cost of capital in the long term, which is, of course, important. However, if the figure is not 40 per cent., what should it be? What are the criteria? The Chief Secretary has already said that if we take out the nationalisations, Britain's performance against the 40 per cent. rule is not bad, so what should we be arguing for?
	My view—this is just an ad hoc response—is that a much more sensible solution than defining a figure would be to have complete transparency about what the public debt is, and then the markets can make up their mind about whether there is a sustainable level of debt. We do not need the Government or even an independent body to do that. If everything is out there—if the private finance initiative debt and pension liabilities are declared—the markets can form a judgment when the Government sell bonds about how sustainable the debt is. That is a more sensible way of going about things than being overly prescriptive.
	We have seen in the past day or so what happens if the Government are too cavalier about public debt. One country seems literally to be going bust—the Icelandic Government may well be unable to place their paper overseas—and I gather from the news bulletins that we are seeing the interesting phenomenon of the Russians taking over rather like Lloyds taking over Halifax Bank of Scotland, which has all kinds of interesting implications. When we see a developed country going bust, we see the end product of extreme carelessness with fiscal policy. That has to be the ultimate brake on what Governments do.
	Just to recap, the motion is perfectly sensible, and I have no hesitation in supporting it. However, I caution against the idea that there is a simple way of defining what fiscal policy should be. Clearly, we need balance over the current cycle and an open, transparent system of declaring Government debt, but beyond that I am not sure that there is a perfect model and do not think that the Conservatives have found it.

Kelvin Hopkins: I will not speak for very long. Much nonsense has been spoken about economics in recent times. Bretton Woods and the sensible framework of economic policy established after the second world war were abandoned in the early 1970s, since when we have suffered four major economic crises, the latest of which is set to be by far the worst.
	What is happening now will surely sweep away the supposed golden rules and delicately constructed monetary and fiscal policy frameworks. Indeed, it will probably see the annihilation of the euro into the bargain. One small mercy is that Britain is not part of the eurozone and can at least decide its own interest rates and fiscal policy, and choose its own value for its currency, suited to our needs.
	The Opposition have raised this debate about the Government's fiscal rules, yet they have been a collaborator in the neo-liberal nonsense that has led us into the current crisis. It became clear that unregulated financial markets and free market capitalism are inherently unstable and lead to mass unemployment, inequality and political crisis. It was the interventionist policies of Roosevelt in America, including a large programme of public works, that led to recovery from the depression.

Graham Stuart: I do not think that I have ever heard anyone in the Chamber suggest that there should be free markets without any regulation. Surely we are now seeing the consequences both of a failure of regulation and of the quality of regulation, rather than of any neo-liberal experiment. There has been a failure of Governments and regulators throughout the world to use prudential standards and ensure that they are enforced.

Kelvin Hopkins: The underlying philosophy of recent economic policy has been deregulation and free markets. Even though there has been some regulation, particularly of monetary policy, it has been nothing like the regulation that we have needed or that we saw after the second world war. Indeed, after the second world war, no one seriously suggested going back to the arrangements that precipitated the 1929 crash and the subsequent depression.
	However, there was one potty ideologue who wanted to turn back history—Friedrich von Hayek. Like hypnotised joiners of a religious cult, our leaders followed Hayek and led us to today's nightmare—Milton Friedman, Keith Joseph, Nicholas Ridley and, of course, Margaret Thatcher. When history is written, the terms of today's motion and the amendment will surely inspire incredulity at their triviality in the face of the global crisis that is now unfolding.
	I never believed that there was anything golden about the Government's borrowing rules. Picking a figure for Government debt as a proportion of GDP was always arbitrary. It could have been 50, 60 or 70 per cent., provided that Government revenues were sufficient to pay the interest. It was just like a mortgage: what one could borrow depended on one's income. At least, that was the case until the sub-prime catastrophe.
	If the Government wish to help the less well off, they could simply collect more taxes from the very rich and substantially increase the basic state pension and child benefits, which I recommend. Successive Governments have resisted returning to anything like the tax rates that existed in the 1970s. Perhaps those rates were rather extreme, but if we were even to inch in that direction, it would be welcome.
	The credit crunch, the crisis in bank borrowing and the coming recession have killed off neo-liberalism, and it is now time to accept that capitalism can be made to work at all only with heavy regulation, a substantial state sector and the use of all the levers of macro-economic policy on a continuing basis. That is my view, and I hope to elaborate on it in more detail in subsequent debates, but I wanted to get it on the record today.

Peter Viggers: I have never risen to speak with more diffidence. This situation is extremely difficult, and I am anxious not to make it any worse. I went through the secondary banking crisis in the 1970s as a director of a merchant bank, and I am now on the Treasury Committee, having previously been a Parliamentary Private Secretary at the Treasury. Given that background, I want to make a contribution, and I hope that some of what I have to say is of some use or value.
	First, we must look at the background. The present Prime Minister, as Chancellor of the Exchequer, got three things right in 1997: first, we did not join the euro; secondly, he created the Monetary Policy Committee; and, thirdly, he decided to follow for some years the spending plans of my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), the previous Chancellor of the Exchequer. He also introduced the fiscal rules.
	The first fiscal rule is the golden rule that, over the economic cycle, the Government will borrow only to invest and not to fund current spending. The second is the sustainable investment rule, which states that public sector debt must be kept at a stable and prudent level and that, in most circumstances, net debt should be maintained below 40 per cent. of gross domestic product over the economic cycle.
	When I made my maiden speech in the House in the spring of 1974, I urged something even more extreme. I was a former director of an oil company with interests in the oil industry, and I proposed that the oil and gas reserves in the North sea were minerals and therefore a capital investment, and that any depletion of a capital investment should be made only if it were matched by spending. In other words, I argued that we should regard the oil and gas money not as revenue but as a depletion of capital. To that extent, I was even drier than the two fiscal rules introduced by the Chancellor of the Exchequer in 1997.
	There were two bad judgments in 1997. The first was the creation of the tripartite arrangements between the Treasury, the Financial Services Authority and the Bank of England, which were insufficiently clear and allowed the banking crisis to come upon us without sufficient recognition by the FSA. The removal of the supervisory role from the Bank of England was, in my opinion, a mistake. Through the Treasury Committee, I have urged that we should try to distinguish between the regulation of banks, which is the responsibility of the FSA, and the supervision of banks, which in my opinion should be the responsibility of the Bank of England, because only the Bank of England has the necessary close, hands-on ability to deal with banking problems. We are talking about the movement of the Governor of the Bank of England's eyebrows, and the quiet persuasion that the Bank is capable of exercising.
	The second bad decision taken in 1997 was the tax of a net £3 billion on pension funds imposed by the Chancellor of the Exchequer. Some of my colleagues call it a £5 billion impost, but in fact it was a £3 billion impost, and it was not the main cause of the problem in the pensions industry. In order, the causes were, first, increased longevity, which was not recognised by the actuarial profession, secondly, stock exchange weakness and, thirdly, the tax imposed by the Chancellor of the Exchequer. That led, however, to the closing of many final salary schemes, which in turn led to many people thinking that instead of saving through a pension, they could save through house values. They looked to house prices as a store of money, which, in due course, they could rely on to fund their standard of living in retirement. I am afraid that that will prove a very serious problem, because people in their 40s and 50s cannot begin to hope for the standard of living in retirement that many pensioners currently enjoy.
	Those were the mistakes of 1997, but things really began to go wrong in 2000, when the Chancellor of the Exchequer gave up on prudence and loosened the spending taps. Spending was up, and much of it was financed through stealth taxes—the definition of which is that they are concealed from individuals, who are not meant to notice them—which have a distorting effect on the economy. The weakness that was building up was masked by an extraordinary world tailwind of prosperity caused by globalisation. The prosperity of the Asian tiger economies, followed by the so-called BRIC economies—Brazil, Russia, India and China—combined with the benefits of globalisation, led to the symptoms of our problems being masked, and we did not realise how bad the situation was becoming.
	Even so, it became necessary for the Government to fudge the figures on the fiscal rules, which depend on the economic cycle. In July 2005, we were told that the cycle began in 1997, not 1999. In 2005, in the pre-Budget report, we were told that the cycle would end in 2008-09, not 2006. Later, in the 2006 pre-Budget report, we were told that the end date would be 2007, not 2008-09.
	The fiscal rules are intended to take into account the difference between generations. In the 1999 Budget, I think, the Chancellor defined what that meant: the Government do not pass on the costs of services consumed today to the taxpayers of the future—each generation is expected to meet the current cost of the public services from which they benefit. That is a laudable intention, but it does not work, and it is distorted by two factors. First, private finance initiatives are not taken into account in expenditure, and expenditure is treated as coming from future revenue, not current capital. Secondly, public sector pensions are largely unfunded, and that huge liability is also regarded as a duty of future revenue streams. In addition, Northern Rock is not included in public debt, and personal household debt in this country is 177 per cent. of disposable income—the highest in the world—which shows that there are problems to come.
	What do we do now? I am not an enthusiast for Government initiatives, but the situation surely needs a lead. My first principle is that this is no time for laissez-faire. My second principle is that initiatives must be on an international basis, so I welcome the international meetings taking place today. It is obvious that we cannot find our way out of this by ourselves, especially as the economy in this country is in a less good position to cope with the problems than those of many other countries. Therefore, we must have international co-operation.
	My third principle derives from what happened with Lloyd's of London, which I think is the nearest analogue to the present situation. I was very much involved in the Lloyd's of London rescue—I was one of the four members of the Lloyd's audit committee. What we did then was draw a line between bad and good assets, and I think that, somehow or other, the same needs to be done now. That is why I am so opposed to the Paulson plan in the United States. Henry Paulson proposed a $700 billion fund to buy toxic assets at more than their market value, thus pumping money into the banking system. I think that that is completely wrong, because it goes against the principle of moral hazard and also leads to the impression that there is a rescue fund of $700 billion.
	During the discussions on the Paulson plan, we heard many Congressmen say that they wanted some of the $700 billion for people in their constituencies. That is completely the wrong attitude. There is not a fund to be shared out; rather, there is pain to be shared. We must find ways of coming together and establishing how that pain can best be shared between those who can afford to share it and those who should bear it, because my next principle is that we must respect the importance of moral hazard—those who have taken the risk must bear a proportionately higher share of the pain.
	My fifth principle is that, as we all know, borrowing short and lending long is sustainable only if there is confidence. That confidence must be restored, and I see no reason why it should not be restored. There is much that is good in the economy—we must bear in mind that even Hitler could not stop the daffodils growing. What we must do, having cauterised the toxic elements, is move on, restore confidence and work with the good elements in the economy.

Kelvin Hopkins: I agree with much of what the hon. Gentleman is saying. There are some good elements in the economy. Is not one of our problems the fact that we have allowed the manufacturing sector to decline and now have a gigantic balance-of-trade deficit in manufactures and goods in general? We must rebuild that sector of the economy, rather than relying wholly on the financial sector, as we have for so long.

Peter Viggers: I am aware of that argument, but it is actually very difficult to distinguish between the manufacturing and service sides of industry. For instance, as a result of CAD/CAM—the integration of computer-aided design and computer-aided manufacturing—much of what was manufacturing has been taken over by people sitting at desks with computers.
	I remember taking part in exactly those discussions in the Treasury when Nigel Lawson, then Chancellor of the Exchequer, did not want to know about the distinction between the manufacturing and service sides. The point was made most effectively at a CBI conference, when one of the delegates said "People talk all the time about the service sector—servicing what?" Manufacturing is, at root, the dynamo of the economy, but, given globalisation, the distinction matters less. If there are jobs that have value added greater than the manufacturing sector, it is logical that manufacturing should stay in the lower-paid parts of the economy. I do not think many people would suggest that we should try to repatriate heavy shipbuilding from Korea and China. The hon. Gentleman has made a good point; an allied point relates to our independence and our ability to remain independent without being sucked too much into global markets.

Kelvin Hopkins: I accept much of what the hon. Gentleman has said, but does he not agree that a strong comparison can be made with Germany, which has retained much of its manufacturing and a balance-of-trade surplus in manufactures, but whose economy is, in other respects, very similar to ours—it is of a similar size, for instance? Would it not have been better to go some way in the German direction and retain some of our manufacturing base, rather than letting all—or much—of it disappear?

Peter Viggers: How do we retain our manufacturing base? Do we impose import duties to prevent the import of cheap products? We have been served exceptionally well by globalisation, and we have been served very well by the ability to import products from other countries that can manufacture them more cheaply than us. We have concentrated more on the financial sector than on manufacturing—and I think that the Germans would be deeply envious of our financial sector, which has also served us exceptionally well. This is part of a much broader discussion. The hon. Gentleman makes a good point, but I do not go very far along the road with him. I reiterate, however, that there is much of good in the economy.
	My sixth point is a minor one, but it is significant in some circles. The Government must use their influence to ensure that the remuneration of anyone working within banking and other sectors is proportionate to their duties. They must use their influence to ensure that banks and other financial institutions set their remuneration at levels that do not affront other people, because there is a lot of anger out there among people who see that bankers have got them into this mess and now bankers are being rescued. Levels of remuneration should be set at tactful levels.

Graham Stuart: I am interested to hear my hon. Friend's arguments, but I do not know what he means when he refers to the Government trying to influence the City. Does he not fear that if they were to intervene in such a way that the highest earning bankers and financiers in the world did not see London as a suitable place in which to base themselves, the bankers and financiers would not cease to earn astronomic sums but would simply earn them elsewhere, with a great loss to the British Exchequer?

Peter Viggers: Indeed, but bankers and others must realise that the levels of remuneration are causing offence in some areas, and they must be more tactful about the manner in which they handle their remuneration. That would be my solution.
	My seventh point is a minor one, which is not to make things worse. That follows Denis Healey's rule on holes, "When you're in a hole, stop digging." Yesterday, the House in its wisdom passed on Second Reading the proposals on dormant accounts. Those proposals will actually result in banks' capitalisation being reduced, which is exactly the worst thing that we could possibly do at this particular moment. I hope that the Dormant Bank and Building Society Accounts Bill makes extremely slow progress, and if it should founder at some point, or be delayed indefinitely, that would cause me no distress.
	My final point is that I heartily concur with the main thrust of the comments of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) from the Front Bench about the office for budget responsibility. The Chief Secretary sat down before I had a chance to do so, but I was going to ask her whether she had read the carefully researched and heavyweight report of the Treasury Committee entitled "Banking Reform", because the Treasury Committee, having taken detailed evidence over a long period and given this matter considerable thought, came to the conclusion that there should be a financial stability committee, which is very similar to the Conservative proposal.
	I was going to ask the Chief Secretary whether she had read the report and concurred with the Treasury Committee's views on this point. However, the Financial Secretary has now rejoined us—he has recently rejoined the Treasury Front-Bench team, where he has served before with great distinction and a great knowledge of the subject. I would be most interested to hear from him the answer to the question that I was going to ask the Chief Secretary. Has he had a chance over the past few days to read the Treasury Committee's report, and does he agree with the conclusion that there should be a financial stability committee? If so, why does he agree with that idea and not with the ideas of the Conservative party?

Mark Todd: My age means that I reflect back on some of these subjects with perhaps more distance than the hon. Member for Runnymede and Weybridge (Mr. Hammond), who spoke for the Opposition. I am not sure whether he is in fact younger than me; perhaps he is, but his memory certainly seems shorter.
	It is worth reflecting on the original purpose of the fiscal rules when they were drawn up in 1997. They, together with the step of providing independence to the Bank of England, were intended primarily to provide reassurance to the market of the discipline of an incoming Labour Government. That was then reinforced by a variety of actions. The right hon. and learned Member for Rushcliffe (Mr. Clarke) has departed, temporarily one hopes, but he will bear out the rigid adherence to the previous Government's spending plans—which he, I think, confessed he would never have attempted to adhere to himself. Thus, the first two years of this Government were a landmark of hairshirt discipline, which many Labour Members found uncomfortable to wear. That bears some relevance to the history lesson that the hon. Member for Runnymede and Weybridge gave us, because this Government started with a rigid adherence to both of the rules that we are supposedly discussing this afternoon and to the tight controls on Government spending imposed by an election pledge. That was in place for a purpose, which I believe most Labour Members bought: we needed to make clear our intentions to a wider community than just the Labour party, and I think our approach worked.
	If a further message were needed about that stern discipline, it was sent in the decision to set aside the one-off benefit from the sale of mobile telephony licences to pay off a proportion of the national debt, instead of using that money—as undoubtedly the previous Government would have, given their approach to the disposal of national assets—to fund ongoing expenditure. Although the decision that that extraordinarily large sum should not be used to fund any current expenditure or infrastructure investment but instead be set aside purely to reduce ongoing debt obligations was again greeted with concern by some Labour Members, the message was clearly understood, both in this House and outside: this Government were serious in their endeavour to maintain tight control over spending and over the uses they made of any proceeds of assets sale.
	That message was clearly understood by the markets at large. I do not want to be too partisan, and I shall address some of the unfortunate elements touched on in the hon. Gentleman's speech, but it is fair to say that the approach was also intended to be a counterpoint to the virginal approach to fiscal discipline of the previous Government. I mean "virginal" in the sense that such discipline was wholly absent, not that it was guarded with some determination. The previous Government's approach led to record borrowing in the early 1990s, which, to be fair to him, the right hon. and learned Member for Rushcliffe sought to address over his chancellorship—the Prime Minister continued the task in the early years of this Government.
	That absence of a fiscal framework, or any framework that one could speak of with any authority, was of course mirrored in the previous Government's approach to monetary policy. I cannot remember the details because they change so frequently, but quite what measurement of monetary expansion we were supposed to be following at any time appeared to vary according to the whim of the Chancellor, Prime Minister or Prime Minister's adviser. The firm intent in 1997 was to set some of this experience behind us and to demonstrate a purpose and a clarity that had been wholly absent from the past.
	However, one must then explain a subsequent period—somewhere between 2000 and 2005—when it is fair to say that there was a significant loosening of discipline. I am retiring from this House at the next election, so I can probably be fairer than others sometimes might be. I had to pop out of the Chamber towards the end of the contribution of the hon. Member for Twickenham (Dr. Cable), but I noted what he said about the structural deficit that emerged during that time, and I agree with him. I shall go on to explain why that happened, but the trend was clearly emerging during that period and was not addressed. There is no doubt that the failure to address it was partly a political choice. My right hon. Friend the Chief Secretary set out the priorities of the Government during that time, and I too had classrooms held up by pit props, infant children having to use outside toilets and other horrors of public provision that are, thank goodness, behind us—certainly in my constituency and, I imagine, virtually every other constituency. The imperative for change was evident, and I can well understand the pressure on the Government to deliver higher public spending, together with the public pledge that had been made to respond to relatively low levels of health service spending set against the European model.
	I stand to be corrected, but it is my opinion that the difficulty that occurred in that period was more due to over-optimistic projection of revenue than to poor controls on public spending. The Treasury Committee has noted on several occasions that revenues, and especially tax streams, tended to be overestimated consistently, without anyone analysing properly why. I do not have an immediate explanation, although oil revenues tended to show huge variances. People said that they could be explained by this or that happening out in the North sea. I shall not venture into that territory, as I am ignorant about it, but one area that deserves further scrutiny is income from corporation tax. I suspect that this country faced increased competition in corporate taxation over a long period.
	Both under the previous Conservative Government—to some extent—and certainly in the first years of the Labour Government, this country had significant advantages in the taxation of corporate bodies. We have not lost those advantages, but the balance has shifted over time and some of those subject to corporation taxation—depending on the business model adopted—suited other environments better. We have not studied carefully enough how that has happened and the effect that it has had on the underlying revenue streams on which we must rely.
	That underlying deficit was perhaps made more acceptable by its occurring during a period of above-trend economic growth, but it was not acceptable to say that because the economy was growing strongly—as it certainly was at that time—we would just live with the unexplained deficit. In one of the many good reports it produces every year, the Treasury Committee gives tables that show the steadily changing forecasts for each revenue year over a long period, and the consistent trend is that the figures deteriorate. The reality does not come anywhere near the projection: it is almost uniformly worse. That should have rung alarm bells. It did so in the Committee, but perhaps we did not set the alarm bells ringing loudly enough. It is certainly true that the Government received regular reminders of the emerging picture of poor performance against projections in public sector discipline.
	We have also had—this has been debated pretty extensively already—a situation in which the two published fiscal rules have been increasingly forced around the realities before us. I would not say that the rules have been bent, but we have certainly taken the evidence that is sitting in front of us and said, "Well, if you look at it this way, that way and then the other way it looks as if we are still just about there." To some extent, there was a desire to fool ourselves, rather than using what the fiscal rules provide, and I shall come back to the value of those rules.
	The fiscal rules are more of a prompt for scrutiny of the underlying issues in the economy than anything else. I personally do not think a 0.5 per cent. variation in one of the rules makes any material difference in economic terms, and obsession with a precise 40 per cent. figure does not help us a great deal. However, the rules should prompt people to ask questions about what the trends are and in what direction we are travelling. I do not think that those questions were asked robustly enough during this period. The difficulty with this tweaking approach and of tying the rules to economic cycles is that one relies incredibly on data that are provided to us on economic performance.
	The other consistent message I have seen throughout this period is that quite sharp changes in data are frequent—for example, changes in the projection of what happened in terms of economic growth are not at all uncommon through this period. Those are often changes not merely of the odd 0.1 per cent. but of quite material amounts. That is true in other areas of data related to the targets.
	Let me turn to the picture presented by the Opposition, because I have possibly earned a few hits by being fairly candid about what I think some of the problems have been. I honestly cannot see the merit—I confined my interventions to two rather narrow technical issues, because I was not going to question the politics—of the "wise men" proposal as it has so far been set out by the Opposition. Without any idea of the mandate that those people will have, the approach is of little value. One of the other critical points is how the body will interface with the parliamentary systems of scrutiny and with the role of the Office for National Statistics, which, as I sought to remind the hon. Member for Runnymede and Weybridge, makes objective judgments about the placing of investments on or outside the balance sheet of our nation. There was little development of that idea from which one could hope to make a reasoned judgment about whether it would be a valuable initiative.
	I am uncomfortable with the idea—even though I am leaving this place, and so by implication might agree with it—that the thrust of the proposal appeared to be that politicians are not of a great deal of value in the process and are not to be trusted, and that we should place economic policy very firmly in the hands of some supposed experts. If we will have to learn one thing from what has happened in the past six to nine months, it is that experts have their faults too. Forecasting the future is a pretty chancey activity and even understanding the present is pretty tough. I am an historian, and that is why I choose to look at the past. It is hard to see what those people would bring that well-informed and well-resourced support for a parliamentary system of scrutiny might not do better. I would encourage some thought in that direction.
	Let me turn to some final points. One issue of difficulty has been the statistical base from which we have tried to shape our economic policy. The Government deserve huge support for the step that they have taken in that regard, and they should be encouraged to go further. They set up the independent Office for National Statistics, which has already started to cause a problem. That is good and right, as we should have a robust debate about the statistics that we prepare. Arguably, as I have said, we have suffered relative poverty in that area, with some degree of complacency. We now need to resource that independent ONS better.
	I noted, and was worried by, the concerns expressed by the Bank of England about the quality of the data used for its decisions about setting interest rates. I think that my honourable colleague on the Treasury Committee, the hon. Member for Gosport (Sir Peter Viggers), will also remember those concerns, and we should listen to them very closely. I do not question the professionalism of the ONS at all, but we need to make sure that judgments about economic policy are made on the basis of information that is as up to date, robust and well founded as we can make it. I think that that has not yet happened.
	Another point is that I think that we probably need a mutually agreed target, although I am not sure that rules are appropriate. As I have said, rules really exist to make us ask questions about what has happened, and we should not obsess about our adherence to them. I should prefer a system that tackles the point raised by the hon. Member for Twickenham. I do not know whether he is right honourable, although he is very honourable. He said that when we spot an underlying budget deficit, we should have a degree of discipline to address it, and that that should be a political process.
	It is not a technical issue, and we need to have a robust debate about why such a thing has happened. There are choices here: if I am right in saying that one of the problems behind the current difficulty was a drift in corporate tax revenues, we should debate how that should be addressed. That is a political judgment, and we as parliamentarians collectively should accept the result of that debate as a discipline for the future.

Stewart Hosie: How would that work? For example, we have seen PFI liability rise inexorably over the years to £190 billion for £60 billion of capital. We have seen the balance of trade deficit rise to £87 billion, and we have also seen a quarter to half a percent. suppression of GDP growth every year for eight years. Such matters have been highlighted and commented on by hon. Members in this House, but will he explain how we can do what he wants and consider them fully without indulging in the usual bun fight about how things are better than they were under the previous Administration?

Mark Todd: The basic answer is that we need to act like grown-ups. Incidentally, the hon. Gentleman raises two points, to each of which I would give a different answer. I have a view about how trade deficits correct over time. We should debate in an adult way in this House an underlying budget deficit that lies relatively firmly under our control. I have no problem with the fact that there will be political disagreements about how we should tackle such a problem, but it is a subject that should at least be discussed properly so that we can attempt to agree our goal. It is not acceptable to run a budget deficit in a time of boom in the knowledge that it will not be corrected by any action taken in that time.
	I was disappointed by the tone of the hon. Member for Runnymede and Weybridge. He started off the debate as a pretty familiar bun fight, and he took the opportunity to kick the Government around, but there are plenty of past errors to be shared around. There is certainly no saintly Conservative past on which we can reflect. There is plenty of hindsight to be shared around, too. Few of us spotted the terrible events that we face. We had inklings of some of the problems, but not their scale or the direction from which some of them have come, so it ill behoves the hon. Gentleman to have been apparently so arrogant and wise on these matters.
	There is much more to be done in building consensus. By and large we have protected the independence of the Bank of England and the operation of the Monetary Policy Committee as an area of relative political consensus. There are some worrying signs—here I criticise the hon. Member for Twickenham, whose opinions I share on some matters—but generally speaking there is shared consensus on the merit of the decision taken and the discipline it has imposed. I wish we could extend that to more adult discussion of these matters, which is why I looked for more from the Opposition than I received this afternoon.

William Cash: When we speak about financial discipline we are also talking about the confidence of the City and those who assess the relative market performance of a country. One of the things lying at the heart of the issue of confidence is whether proper financial disciplines are in operation in the financial affairs of a given country. I certainly take the view that the proposals of my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) to achieve a financial stability framework are in principle a very good idea. In addition, I firmly endorse the fact that any such arrangements must hold the Executive to account.
	When we are talking about sound money, however, we have to look at what has led us into our current situation. One of the features that intrigues me greatly, which was alluded to by the hon. Member for Twickenham (Dr. Cable) and which I followed up in an exchange with the Chief Secretary when she was in the Chamber, is the extent to which we are being sensible in relation to our indebtedness—general Government gross consolidated debt—and its relationship to gross domestic product. I referred to the Office for National Statistics figures released on 30 September and pointed out that the figure of 36 per cent. given by the Chief Secretary—I am happy to be corrected by the Financial Secretary if I am wrong—was in fact 42 per cent. at the end of March 2007, according to the independent analysis of the ONS. The ONS suggests in its report that in line with rules imposed on it from above—by which I mean EUROSTAT—Bank of England lending to Northern Rock should be re-routed through Government as from 9 October 2007:
	"If the loan were re-routed via government then the debt to GDP ratio would be 46.1 per cent. at end-2007."
	That does not take into account any implications in respect of Bradford & Bingley, nor does it take into account what is in the pipeline.
	One of the curious things that has not, as far as I can judge, been discussed at all in the debate is what is going on in Luxembourg at the moment between the Finance Ministers in ECOFIN and how they are addressing all these questions.
	The idea of a European bail-out of the banking system was pure grandstanding by the President of France, who is currently president of the Union. It was a nonsensical notion. There is absolutely no way in which the amount of money required could possibly be provided by the taxpayers of Europe. Some of the countries of Europe would be devastated by the idea that they should contribute to a bail-out for one country. That is why Germany took a position in relation to its own vital national interests. The same applies to Ireland.
	I feel strongly that one of the reasons there are jitters, deep anxiety and a sense of disturbance in the economic markets in the City is that people there witness decisions being taken that have an impact on financial discipline in individual countries. We have seen what happened to Iceland. The real question for the countries concerned is whether the system within which they operate is sensible enough for anyone to have any confidence in it.
	I shall not go into the issue of derivatives, financial instruments and the rest of it, although, in a sense, that is one of the causes of the problems that have accumulated, along with a lack of moral discipline among the people running the financial companies, as I said in a letter to  The Times recently. The real problem is a lack of prudence and discipline, but that has not been generated over a very short period. In fact, it is implicit in what went wrong in the arrangements developed under the Maastricht treaty, a matter that was raised by the hon. Member for Twickenham.
	I do not need to go into every detail of the reasons I took such a strong position against the Maastricht treaty, but we are still living with its consequences; when we measure financial discipline, using the Office for National Statistics paper on Government deficit and debt, we see that its headline is "Government deficit and debt under the Maastricht Treaty". That seems to have been overlooked.
	I have not heard much comment today about the stability and growth pact. We really should examine how the mechanisms actually work, and the extent to which the City of London, or indeed economists internationally, can have confidence in the system used by any particular Government. Here, we are speaking of the United Kingdom, but we might also have regard to the eurozone and Europe as a whole. From the outset, it seemed to me that the stability and growth pact, rather like subsidiarity, was a con trick. It set out rules that were never going to work. When the European Union stability pact was proposed, the then Chancellor of the Exchequer wrote a letter, dated 22 November 1996, to all Members of Parliament—he obviously regarded the matter as important—setting out in detail why it was such a good idea.
	The relevance of that point to the debate is that, through the whole of Europe, the question that is or ought to be on the radar screen is whether the Governments of Europe and the Government of the United Kingdom—which, because it is outside the eurozone, merely has to endeavour to comply with the rules of the stability and growth pact, whereas all the other countries are subject to the full panoply of rules—have been left dealing with funny money. There is no way that I can see for anybody to properly assess the true levels of borrowing of the member states.
	I shall go through the figures, which are of some interest, though they are rather a mouthful. I shall be slightly selective as I cannot read them all out. There are eight member states with Government debt ratios higher than 60 per cent. of GDP in 2007. They include Italy, whose level currently runs at 104 per cent., and Greece, at 94.5 per cent.—and we saw what happened to Greece the other day. Belgium is running at 84.9 per cent., Hungary at 66 per cent., Germany at 65 per cent., France at 64 per cent., Portugal at 63 per cent. and Malta at 62 per cent.
	Although I thought the Minister got her figures slightly wrong, according to the ONS figures, it is true to say that the United Kingdom is at only 46 per cent. I begin to get slightly nervous about the outpourings from Government sources or briefings off-side suggesting that we have room for manoeuvre to increase our level of deficit to meet some of the gravely excessive deficits of other countries. If we increased ours by 20 per cent., we would match the levels of deficit of Germany and France, but that would not be good policy and it would certainly not be in line with sensible financial discipline.
	The reason why I am so concerned is that I believe that confidence in the entire system has been undermined by countries that have been running unbelievable deficits, particularly the United States. I do not have the figures at my disposal, but I know that they are unbelievably high. That is the problem.
	Just as in the case of high street banking, the question arises whether individuals have over-borrowed and have been allowed or encouraged to borrow in excess of their income. In some cases borrowing has been up to 110 per cent. of income. In relation to confidence in the markets and to Governments and the European Union, a monumental amount of excessive debt has been accumulated which cannot be explained in terms of the intrinsic value of their currencies and the amount of money that they are generating by manufacturing products that are tangible and explicable. The question is whether we are effectively running on funny money.
	I am worried that the enormous sums of money—again, this is a matter of financial discipline—that are being talked about will be funded only by sovereign wealth funds, over which we would have no control, or by printing money, which would make the position that much worse.

Austin Mitchell: I was most interested in what the hon. Gentleman said about the historic borrowing levels, because it illustrates how the requirements for entering the euro were fiddled, particularly in favour of Italy. He is on weaker ground, however, when it comes to arguing that over-borrowing by Government is to blame for the present financial crisis. What is to blame for the present financial crisis is over-lending by banks and the financial sector.

William Cash: I am not in any way disagreeing with the hon. Gentleman's last point, but the accumulated lack of confidence in how individual countries internationally are running their affairs has a great deal to do with the anxiety in the markets. If the Governments are to nationalise, they will simply increase their indebtedness by buying out those banks that have gone broke or are in severe danger, and that simply increases what I would see as the dangers of a lack of confidence in how countries are running their affairs. There are dangers in both the over-borrowing by the countries concerned and in the over-lending by the banks. News items and commentaries now refer on a daily basis to billions, and that is now more or less regarded as the language that we are used to. Until a few months ago, we talked about millions. Now we talk about billions as if this is an enormous casino of the universe.

Kelvin Hopkins: I sympathise a great deal with the hon. Gentleman on European matters, but with regard to Britain, surely when banks are nationalised people become more confident about them than about the private banks, for good reason, and if Governments are taking counter-recessionary measures through additional spending or interest rates, that will make the economy stronger and raise confidence in the British economy relative to other economies in particular. Is it not sensible to nationalise banks and to borrow and spend where necessary?

William Cash: I should put it on the record that I am not a great advocate of nationalisation. At present there is a severe crisis, but I am somewhat concerned that in all the BBC commentaries the argument tends to gravitate to the high street, banking and city element, all of which requires a great deal of intensive discussion, but not enough attention is given to the question of the way in which individual countries are running their own affairs. That is why I thought that the reference by my hon. Friend the Member for Runnymede and Weybridge to attempting to achieve a new financial stability framework is at least ensuring that we are moving in the right direction, even if one has some reservations about certain aspects.
	I listened with interest to what the hon. Member for Twickenham said with regard to the NAO. The NAO, with all its expertise, must be given a specific role in relation to all this. The hon. Gentleman also referred to the inflexibility in how the Maastricht rules have been devised, and we still live with them. They were passed in 1993 and the stability and growth pact came along in 1996. That was an unmitigated disaster, and I said so at the time. A short time after the original proposals for the stability and growth pact were issued—the Chancellor of the Exchequer had written to all Members of Parliament to explain the matter because it was obviously important—I wrote to all Conservative Members saying:
	"If the stability pact comes into force member states would be forced to restrict their levels of borrowing. This would impose a fiscal inflexibility which, combined with a loss of monetary control and exchange rates, would severely diminish member states room for manoeuvre."
	That is where we are now. I went on:
	"The options for a country in recession would be extremely limited. It is not in the interests of the economic stability of the Community for member states to be helpless in the face of recession. Neither is it in the interests of political stability, for there would certainly be public unrest if a government found itself unable to respond to its peoples' calls for economic action."
	The UK has only the necessity to endeavour to subscribe to those rules, but the rest of Europe has to obey them. The plain fact is that they are not obeying them. There is no financial discipline. I have already given the levels of indebtedness and it is quite clear that the European Union is not working and that the rules that are supposed to be applied are not being applied. I happened also to point out in the letter that I thought that it was crazy to impose massive fines on countries that have got themselves into a situation of complete financial instability and have exceeded their budget deficit arrangements.

Kelvin Hopkins: I thank the hon. Gentleman for giving way yet again. Is it not the madness of the eurozone that countries such as Italy cannot change their interest rates—Trichet seems bent on keeping them too high—and they cannot devalue, so the only flexibility that they have is with spending? There are rules governing spending, but inevitably, if they want to avoid social unrest they will have to spend more money and run into debt, because the other two levers of macro-economic power are taken away from them.

William Cash: The situation becomes more difficult, and that is what concerns me. The level of indebtedness is not just a question for the banks; this debate is about fiscal rules with respect to Britain and, by implication, the rest of Europe, because we are affected by what goes on out there. Because of the legal framework that has been created, that does not work. It is completely absurd that we are in the situation that we are in, and it has to be renegotiated. It is interesting that the member states in question, in an attempt to try to extract themselves from the impossibilities, have now gone off in a range of divergent ways precisely because they are completely different economies with different circumstances. The one-size-fits-all policy no more applies to the single currency than it does to the question of borrowing. It is completely absurd that we are in this situation. That puts an enormous amount of uncertainty into the markets and is having an impact on our own economic situation as well.
	I agree that we need to have much more in the way of transparency—again, I agree with the hon. Member for Twickenham in that regard—but if there is to be transparency, one must be honest and straightforward, just as companies are supposed to be in the way in which they arrange their accounts. I cannot believe that the amount of money that appears to be hidden in relation to our economic affairs and in relation to how our accounts are presented can possibly leave off-balance sheet vast sums of money which when added in would change the picture as substantially as I believe they would. It is utterly irresponsible for us to conduct our affairs in such an imprudent manner, and I would strongly recommend that we engage in a policy of sound money, balance the books and have sensible accounting principles.
	I quite understand that at present we have severe difficulties and we must try to make as good a job of this as we can for the time being, but more European rescue loan arrangements on the scale that Nicolas Sarkozy put forward in his grandstanding arrangements are entirely the wrong way to go. In my experience, the more Europe gets involved, as with the exchange rate mechanism and, as I have said, the stability and growth pact, and in relation to all these other matters where Europe will inevitably find itself, as it has always found itself, in suggesting more regulation and more of a European framework, the more the problems will multiply, so that when the reckoning comes there will be monumental implosion because it will have created a compression chamber with vast levels of debt that it cannot sustain because most of the manufacturing goes on in places such as China and not in our country or in Europe.
	The net result is that we are running a policy of funny money—printing money, borrowing from abroad and engaging in an undisciplined process that is undermining confidence in the countries and therefore also in their democracies. Those decisions will not be sustainable indefinitely. The net result will be that people revolt against them, because they will produce high levels of unemployment and there will be no way of retrieving the situation. I urge my hon. Friends to look at not only an office of budget responsibility, but—and very carefully—at how we can guarantee as far as possible that our own economic affairs are run in a sensible manner and that we are not letting down the British people.
	Whatever goes on in other countries, we have to look to this House of Parliament as the basis for the decisions taken on behalf of those who elect us. That is what worries me a bit about transferring responsibility to other people. As long as the responsibility remains in this House, I will remain happy. The idea of the monetary committee in relation to interest rates has worked, and it would be a good idea for us to apply a similar principle. However, above all else, we have to ensure that the buck stops here—and not only that; we should realise that we cannot buck the market. There has been far too much borrowing, and far too little to support it.

John Howell: I want to return to the fiscal rules themselves. One of the basic lessons that I learned from business and helping to run a large public sector organisation was the need to ensure that there was a clear and honest framework with which to measure progress and success, and to which one could be held accountable while retaining flexibility in the means of delivering against it. What gave confidence to investors and regulators was not only that the framework and criteria were measurable and robust, but that the underlying assumptions were realistic, consistent and quantifiable and that the flexibility in delivery did not undermine the stability of the business or the ability to stick to the plans that had been drawn up. On that level, I have problems with the Government's fiscal rules, which, it seems to me, are the precise opposite of what I have described. There is a lack of flexibility over the layers of control and a series of rules the underlying basis of which allows for considerable discretion in determining how they are measured.
	The Treasury talks of having introduced significant steps to strengthen the framework for fiscal policy based on strict rules, but the more we drill down, we see how less strict and more flexible the underlying assumptions behind those rules become. Rather than strengthening openness, transparency and accountability in fiscal policy as the code envisaged, the Government have built in large opportunities for each rule to be undermined. I should like to refer to four issues, some of which have already been referred to in this debate.
	The first relates to the time frame in which the Government's rules are set. The fiscal rules adopt the time frame of an economic cycle. We know from the Treasury that a full economic cycle includes one period in which output is above potential and one in which it is below potential. However, given that economics is not an exact science, there is considerable scope for different interpretations. I would go further than the hon. Member for South Derbyshire (Mr. Todd) did, if I understood him correctly. Given that the definition of the economic cycle is so crucial to the Government's golden rule, it is hardly surprising that the rule itself becomes discredited if, during a cycle, the interpretation of it becomes influenced by political considerations. My hon. Friend the Member for Gosport (Sir Peter Viggers) and others have referred to the difference of opinion about the end date for the current cycle.
	As I have said, economics is not an exact science, but the time frame needs to be put on a robust footing—we need at least to make sure that in the age of responsibility that is to follow, the ambiguities are taken out so that there is a clear indication that the Government will, after all, do the simple thing of defining what they are going to do and stick to it.
	The second and third elements of the underlying assumptions that give me concern relate to the sustainable investment rule, which is stated as the relationship between the amount of net debt and GDP. If we cannot do anything about the amount of debt and are stuck with an accumulated mountain of debt—which many commentators believe will exceed the 40 per cent. barrier with or without the effects of the financial crisis—the only variable is the size of GDP. Here, too, we have seen considerable ambiguity: the revision of how the financial services sector was measured added £20 billion to the size of the economy, but caused great surprise because it was less than had been originally hoped for. Such ambiguity was not helpful.
	However, if that is worrying, surely more worrying is the other side of the equation in respect of the definition of debt. We have seen that debt cannot today be measured by what goes on the balance sheet. We have had many references to the realms of accounting for private finance initiative liabilities and the valuations of the long-term service contract elements. However, it cannot any longer be in the interests of transparency to maintain significant amounts of liability off balance sheet and to allow significant ambiguity in valuation.
	My last cause of concern is about investment, which is a central part of the golden rule: the Government will borrow only to invest and not to fund spending. I am aware that the economics and business definitions of "investment" can be slightly different, but even under the broader, economics definition, there is an expectation that money spent as an investment will generate some new or additional outcome or produce a result that will be used to give benefit in future.
	When one looks at statements by Ministers on their spends, it is often difficult to determine what the investment element is. Actually, I have considerable sympathy with them on that, because the issue is complex. When looking at IT spend, for example, I have seen for myself that it is sometimes difficult to know whether software development should be characterised as investment or current spend. The only point that I would make on that is that under the regime imposed on local government, there is a much stricter and clearer definition of what is and is not capital.
	We have two choices: first, we tighten the rules so that the investment criteria of any spend characterised as investment are richer. If the distinction has become irrelevant or there is a problem with transparency, or accounting rules will not allow that, the current criteria clearly do not deserve to be at the centre of fiscal policy. We have ended up in the worst of all worlds: we have a system of fiscal rules that now constrict flexibility in how the economy can be managed, but are themselves so full of holes that they provide less credible help in the management of the economy.
	Clearly, the fiscal rules were designed for an economy completely different from the one that we now face. Many of the benchmarks must have been seen at the time to be in no way stretch goals or stretch targets that should be kept to, and that must at least have contributed to the imprudence of the years in between. It is time that the rules were abandoned and that a new framework that sets a more rigorous prospectus for the public finances—with comprehensive definitions of measurement criteria that are less susceptible to political interference—was introduced.

Austin Mitchell: I am slightly surprised that this is an Opposition day debate, because I would not have thought that any sensible Opposition would want to create an opportunity to display their ignorance of basic economics in such a way. My right hon. Friend the Secretary to the Treasury—I mean Chief Secretary; it is difficult to keep up with her meteoric rise, on which I congratulate her—was right to attack the economic illiteracy that lies behind the Opposition's motion. I wondered whether the idea came from New Zealand's Fiscal Responsibility Act, in which they have been displaying considerable interest, but I concluded that it could not have done because that imposes duties on the Opposition in the shape of a requirement to say, if they propose an increase in expenditure, what they are going to cut or where the money is going to come from to sustain that increase. We could do with that in relation to our Opposition, who are proposing all sorts of things without telling us how they will be paid for or how they will be combined with the programme of cutting public spending and taxation.
	The motion represents an attempt to shackle the Government by imposing inflexible rules on their borrowing. The hon. Member for Henley (John Howell) criticised some of our golden rules for borrowing. I have sympathy with him on that, because I never thought that they were anything more than a public relations exercise to show how respectable and responsible we are; they were not a serious framework of rules to abide by. The strength of the golden rule was that it was subject to interpretation in terms of when the cycle began, when it ended, and whether the money was going to investment or to spending. That is how rules have to be—politically flexible and subject to political interpretation. I went along with that because I did not regard it as a serious exercise but as just a PR exercise to show ourselves to be respectable and disinclined to borrow on a large scale.
	The Conservatives propose a greater degree of inflexibility on Government borrowing, with hard and fast rules. That is unacceptable. The only rule for borrowing is that there is no rule. It is impossible to impose rules on borrowing. First, there is no basis in economic theory for doing so. The rules proposed today are based on classic neo-liberalism—on Friedmanite economics. That is totally unrealistic, because that theory is totally discredited. The world has moved on, but the Opposition have not. They have a responsibility for bringing themselves up to date on how economies function and whether there is an intellectual basis for the Friedmanite approach—in my view, there certainly is not.
	The second argument against rules is that they do not change—they handcuff a Government when circumstances have changed. We are now in a situation where we need to borrow substantially in order to stimulate the economy. That is nothing but simple Keynesian economics. Borrowing must suit the circumstances of the time. In a recession or depression, it is necessary to borrow and to spend. We cannot therefore be shackled by the kind of rules that the Opposition, out of their intellectual ignorance of economics, want to impose on Government. I am sorry that they have been so slow to catch up with the current circumstances given that they announced at their conference that they want to co-operate and work with the Government. It is impossible to work together other than on the same intellectual basis. If the Opposition are going to insist on rules that are inflexible and cannot be operated in the present circumstances, there is little basis for co-operation. They have to bring themselves up to date and modify their thinking by looking at the actual state of the economy and what the solutions are.

Adam Price: I entirely agree with the hon. Gentleman's trenchant critique of the Opposition's analysis. However, is not part of the problem, and the reason we have got to this stage, the fact that the spectre of neo-liberalism has been haunting not only the Conservative Benches but the Labour Benches?

Austin Mitchell: The hon. Gentleman has a point. It is certainly true that we have been too insistent on markets, which is worrying, but there is no possibility of maintaining that approach in the circumstances that we are now trying to deal with. We are grappling with an entirely unprecedented situation that is completely different from the one that has prevailed over the past 11 years. The good years are over. In that situation, neo-liberalism must be completely relegated because it is a shackle on how Governments approach a crisis. It has certainly been junked big style in America by the first socialist President, who is going round nationalising everything in a way that surprises me but probably surprises Republican supporters even more. However, that is a diversion. My point was that rules fixed for one set of circumstances cannot work in another, and circumstances have changed drastically.
	The third problem with such rules is that Government will always evade them. There will always be fiddles. Just as the banks have been fiddling their reserve requirements by off-balance sheet transactions on a considerable and very damaging scale that has brought them into jeopardy, so the Government have been fiddling their golden rules by off-balance sheet accounting through the private finance initiative.

David Taylor: Will my hon. Friend give way?

Austin Mitchell: I should not have mentioned PFI—I might have known that it would bring my hon. Friend into the debate.

David Taylor: I am reluctant to interfere with my hon. Friend's comprehensive demolition of this miasmic mess of a motion, but he mentioned PFI. Is it not rather nauseating and perverse of the Conservatives to draw attention to PFI, which was bequeathed to us as the result of a love affair between John Major and the private sector and which our first Chancellor picked out of his waste paper basket and made work in an odd sort of way, the cost of which we will grapple with over the next 25 or 30 years? How can they criticise that?

Austin Mitchell: I am most grateful to my hon. Friend for his criticism of PFI. I agree. PFI was a way of moving things off balance sheet so that Government borrowing figures were not affected. It was a more expensive way of doing things and, as he says, we will pay for the consequences over the next 20 years. Certain health authorities, in particular, have been shackled by it. In its favour, it got the hospitals and schools built and open, but more expensively than would have been the case had it been done through public borrowing at a lower rate of interest. That is an example of my point—if we have rules, they get fiddled by private banks and institutions and by Governments. PFI is like the tax farms in the ancien régime—it results in selling off chunks of Government revenue, which is a dangerous thing to do. However, I will go no further down that road in case I excite my hon. Friend even more.
	The proposal on rules is worrying because, as I said, the only rule is that there are no rules. That point has something in common with Bank of England independence. We imposed a rule that it was to manage inflation only, which tied us to something like a one-club approach to golfing, and we are now in a different situation where we need the flexibility that the Fed has in the USA. It has a requirement to maximise employment. We should have that, too. I am glad that the Liberal Democrats have caught up with the proposal that I put to the Treasury Committee during last year's review of 10 years of the performance of Bank of England independence, which was that the rubric should be widened. They always get there in the end, and I hope that they read more of my ideas on my website. We should reduce interest rates to the American level, and the 2 per cent. rule—the rubric—is a shackle on the Government. We cannot have a recovery unless we get interest rates down to American levels. In Japan, a failure to reduce interest rates at the onset of depression in the early 1990s meant that it languished for a whole decade in recession. I shall not continue with that line of argument, but it is an indication of the danger of rules.
	The present need is not only to reduce interest rates, but to borrow and spend to stimulate the economy. The rules in question would shackle us in that regard. The only economics on which I would base rules is Keynesian economics. If the Government do not borrow, the private sector and private individuals have to borrow more. Government borrowing is necessary now to stimulate the economy to return us to a pattern of growth. That is the only way forward, and it makes the Opposition's motion even more ridiculous.

David Gauke: It is a pleasure to make the winding-up speech for the Opposition in this debate. I begin by welcoming the Financial Secretary on his return to the Treasury; this is the second day running where I have had the opportunity to welcome a new Treasury Minister. I think that this is the right hon. Gentleman's fourth spell as a Treasury Minister. I do not know whether that is some sort of record, or what precisely he has done to deserve constantly being put back into the Treasury, but we welcome him. I know that he is well regarded by Members throughout the House. I would like to mention briefly his predecessor, the right hon. Member for Liverpool, Wavertree (Jane Kennedy) who has moved on to the Department for Environment, Food and Rural Affairs. She distinguished herself in the role of Financial Secretary.
	We have had an interesting and wide-ranging debate. The hon. Member for Luton, North (Kelvin Hopkins) started the Back-Bench contributions, declaiming the end of neo-liberalism. If anything, he was being slightly restrained; I think that he wanted to go further and declaim the end of capitalism.

Kelvin Hopkins: That's next.

David Gauke: The hon. Gentleman says that that is next—perhaps it is an ambition for him to achieve. I know people who share his views have been declaiming the end of capitalism for some time. Perhaps their time will come, but I doubt it. He also called for the return of 1970s levels of personal taxation, which does not have support in my party.

Kelvin Hopkins: I said that we ought to move in that direction, not return to the levels where, as Denis Healey said, the pips squeaked. That would be too hard.

David Gauke: I take the hon. Gentleman's point and stand corrected. I assume, therefore, that 98 per cent. rates are merely a long-term aspiration, not an immediate objective.
	On looking back to the 1970s, my hon. Friend the Member for Gosport (Sir Peter Viggers) gave us an historical perspective, going back to the 1970s and the benefit of his experience in the commercial world, as well as his long-standing membership of this House. In a wide-ranging speech, he addressed a number of the substantial concerns as we address financial matters.
	The hon. Member for South Derbyshire (Mr. Todd) said that he could make a candid speech because he is leaving this House. As he is leaving the House, I can be candid about him: he made a characteristically thoughtful and balanced speech that raised a number of important points. I do not agree with everything that he said, but he looked back on the early years of this Labour Government, and the fiscal conservatism that existed then, with a fair degree of nostalgia. He was also open about the fiscal loosening that followed those early years. He raised an important point about corporation tax, which we are not concentrating on in this debate, and he raised fair questions about our proposal, which I hope to address during the debate.
	My hon. Friend the Member for Stone (Mr. Cash) highlighted the need for sound money and the high level of debt in many eurozone countries, and the instability that may follow from that. He also highlighted dangers with the stability and growth pact. He raised concerns that he has consistently raised in this House and outside for some years, and I expect that he will continue to do so.
	My hon. Friend the Member for Henley (John Howell) made a thoughtful and intelligent speech in which he outlined, from his extensive business experience, the need for a clear and honest framework, and he called for more rigour in our fiscal rules.
	The hon. Member for Great Grimsby (Mr. Mitchell) made a lively speech. I disagree with his premise—he is a long-standing advocate of Keynesian economics, and argues that as far as borrowing is concerned, the only rule should be that there are no rules. When he made the observation that he more or less went along with the Government's fiscal rules because they were "just a PR exercise", he hit the nail on the head, however.
	The hon. Gentleman also said that the rules will always be fiddled, which raises an important point that I hope to address in my later remarks. He questioned whether our plans were based on what occurred in New Zealand. Our precise proposals are not used anywhere—they are new—but within the document that we produced setting out the plans, we referred to the experience of Belgium, Denmark, Germany, Austria, the Netherlands, Sweden and the US. If we were remiss in not including New Zealand, perhaps we should look at the document again, but to clarify, our plans are not based on what is happening there.
	I would like to continue on a bipartisan note, and given the remarks of the hon. Member for Great Grimsby, I should say that by "bipartisan" I mean something on which my party and Government Front Benchers agree. It is vital that public finances are sustainable over the long term. There is a need for caution and prudence—at least that is the professed position of Government Front Benchers. When the then Chancellor of the Exchequer addressed the House in his first Budget speech in 1997, he said:
	"Public finances must be sustainable over the long term. If they are not then it is the poor, the elderly, and those on fixed incomes who depend on public services that will suffer most."—[ Official Report, 2 July 1997; Vol. 297, c. 304.]
	The second point on which we agree with the position set out by the then Chancellor in 1997 is that there is a need for external discipline in order to reassure the public, the markets and Parliament itself that public finances will be run in a prudent manner. We agree that public finances must be sustainable in the long term and that an external discipline is needed to ensure prudent management. However—this is where the consensual tone ends—it is now clear that the Government have achieved neither an effective external discipline nor sustainable public finances.
	The then Chancellor's response to the need for sustainable public finances were his fiscal rules: the golden rule, which states that over the economic cycle the Government will borrow only to invest and that current spending will be met from taxation, and the sustainable investment rule, which states that public debt will be held at 40 per cent. of GDP. He put those rules at the very heart of his economic policy. He said that they were the
	"basis on which...people have seen this Government as competent"—
	words that are only too true.
	The issue is not only for academics. Fiscal sustainability matters to us all—to mortgage holders, who may face higher interest rates, to pensioners and others on fixed incomes fearful of higher inflation and to future generations, who will have to pay tax for what we borrow today. As Mervyn King, the Governor of the Bank of England, told the Treasury Committee last month:
	"The long-term risk is a fiscal framework that is not perceived by financial markets to be credible",
	which puts up
	"pressure on inflation expectations because it undermines the market's belief in the credibility of both the monetary and the fiscal framework".
	He continued:
	"And that will make our life more difficult if inflation expectations were to remain higher than we would wish".
	What of the then Chancellor's proposals? In 1997, he described the rules as providing a new discipline, openness and accountability. However, if they provide a new discipline, why do we have the highest borrowing figures for any major economy apart from Hungary, Egypt and Pakistan? If the rules provide financial discipline, why, according to the Institute for Fiscal Studies, have 19 out of 21 comparable industrial country Governments done more than the UK Government to improve their structural budget balances, and why have 16 of them done more to reduce their debt burdens? What sort of financial discipline is it that allows consistent borrowing in good years, leaving us nothing spare in the bad years? The International Monetary Fund, the European Commission, the OECD and just about every independent commentator advised the Government that their fiscal policy was reckless, and yet the fiscal rules did nothing to prevent that from happening.
	Have the rules provided more openness and accountability? The Government's assessment of their fiscal rules has been characterised by a litany of self-serving definitional changes, which invariably assist them in meeting their own rules. Dates of economic cycles have been altered and public sector contracts have been pushed off balance sheet.

David Taylor: Does the hon. Gentleman agree that sustainable fiscal rules include sustainable taxation? Is he surprised to learn that in the 11 and a half years between May 1979 and November 1990 when the now Lady Thatcher was Prime Minister, the proportion of GDP to taxation was five full percentage points above the level that the current Prime Minister achieved in his 10 years as Chancellor? Surely the current Prime Minister's actions were more sustainable than those of the Lady, whom the hon. Gentleman no doubt admires.

David Gauke: I am well aware that taxes initially increased under Lady Thatcher's Government. However, the Conservative Government at that time were reducing debt and borrowing at a faster rate than in the first 10 years of this Government. If the hon. Gentleman is making an argument for fiscal conservatism, I fully endorse it. However, the problem is that the Government increased taxes at a time when the economy was growing. Margaret Thatcher was able to get the public finances in a good position and then reduce taxes through the 1980s.

Kelvin Hopkins: I am sure that the hon. Gentleman will remember that Mrs. Thatcher's first act in Geoffrey Howe's first Budget was to switch the burden of taxation from income tax, which is progressive and fair, to indirect taxes by substantially raising VAT. That was a direct shift of income from the poor to the rich.

David Gauke: At the time, that reduced direct taxes, because we had 98 per cent. tax on unearned income and a standard high-rate income tax of 80 per cent. It was vital to get incentives back into the British economy. It was only by returning incentives to this country that we saw the economic growth from which we have benefited ever since.
	To return to the fiscal rules, so fiddled have they been, to use the word that the hon. Member for Great Grimsby used, that the IFS has said that they
	"are now regarded by most informed observers with scepticism at best and cynicism at worst".
	I challenge the Minister to name a single reputable commentator who now believes that the rules are taken seriously or, indeed, anyone who has taken them seriously for the past three years. Even the credibility of the Treasury's fiscal forecasts has been badly tarnished. For seven consecutive years, the Treasury has made over-optimistic Budget forecasts, underestimating the size of the Government's deficit and overestimating how quickly it would shrink, as the hon. Member for South Derbyshire has pointed out.
	A balanced Budget was always round the corner. In 2003, the Budget would be back in balance by 2005. In 2004, that date was 2007; in 2006, it was 2008; in 2007, it was 2009; and in 2008, it was 2011. I predict that in 2009 the date of the balanced Budget will be moved on again from 2011. However, at least then the Government will have the defence that there is an economic slow-down. The previous years were the good years. If the rules allowed the date to be moved in the good years, there is something flawed in the rules. As Robert Chote of the IFS has put it, given that record of forecasting, the Treasury has engaged in a
	"sustained display of conviction forecasting".
	We must do better. It is time for a new approach that is not based on subjective dating of the economic cycle. As the Treasury Committee has consistently said, we must be forward looking, with a Government who concentrate on bringing down debt rather than evading their own rules. We will introduce an office of budget responsibility. It will assess independently the sustainability of the Government's finances. It will no longer allow a Chancellor to profess prudence on the one hand, but to borrow recklessly on the other. It will give Parliament the opportunity to hold the Government to account.
	Our proposal has been criticised on the grounds that such an office would be a quango and would diminish the role of Parliament. That point was made by the hon. Member for South Derbyshire. He will know that, as a former member, I have a great deal of respect for the Treasury Committee. However, I see our proposal as a way of improving accountability. Let me give one example. In March 2006, I was a member of the Committee and wished to question the then Chancellor about the change in date of the economic cycle for the purposes of the golden rule—I am sure that the hon. Gentleman recalls that occasion. I asked whether the golden rule would have been met but for the change in date. The then Chancellor consistently refused to answer. Indeed, he provided a host of technical arguments that were difficult for the Committee to engage with.
	Let us imagine circumstances in which forecasts and assessments were produced by a body as part of the Red Book. That body would therefore be independent, so we would not face the problem of conviction forecasting. It is not for us to determine how a Select Committee decides to take its evidence, but members of the office of budget responsibility would be able to give evidence to the Treasury Committee as part of an inquiry by that Committee. The Treasury Committee would potentially have an important role in appointments to that body, reviewing appointments and taking evidence from potential members.

Graham Stuart: To pick up on the issue of ensuring the office's independence, I wonder whether Conservative Front Benchers will consider giving the Treasury Committee the right of veto over appointments to the office.

David Gauke: I am grateful to my hon. Friend for that. There will certainly be confirmatory hearings. The precise powers are something that we can look into, but he has raised an important point.

William Cash: Does my hon. Friend agree that in the formulation of such ideas it is important to bear in mind the role of the National Audit Office—and therefore to try to integrate the thinking with it, to ensure a degree of responsibility and transparency—and the role of the Public Accounts Committee, which has not been mentioned so far? If evidence were given to the Treasury Committee, that would be a powerful reason for giving evidence to the Public Accounts Committee, too, and for subjecting such a body to cross-examination.

David Gauke: I am grateful to my hon. Friend, because he has brought me on to a point that I was going to make. The hon. Member for Twickenham (Dr. Cable) also touched on the Public Accounts Committee and the National Audit Office. Our view is that the National Audit Office does not have the expertise on fiscal matters. It provides a sterling service in scrutinising Government expenditure, but it is not a specialist body, and we are talking about a specialist task. We therefore think that a separate body would be better placed to perform that task. Given that, my view is that the Treasury Committee is in a better position to do so.
	I hope that I have addressed the concerns that have been expressed about parliamentary accountability. The proposal is about providing a rod for our own back. It is about providing an external discipline that will work, rather than rules that can be fiddled. It will be an essential part of the framework whereby we restore trust into politics.
	The fiscal rules have failed and, in many respects, they sum up the Prime Minister. At first, they appeared a bit complex and rather technical, but worthy, prudent and reassuring. Then came the realisation that the complexity and technical details were there more to baffle and confuse than to assist. Finally, there came the recognition that the fiscal rules—perhaps like the Prime Minister—were not as worthy, prudent or reassuring as was once thought, and that they were in fact entirely ineffective in achieving their objective. They were there only for political show—a PR gimmick, in the words of the hon. Member for Great Grimsby—and when it came to substance, there was nothing there. We must do better, and we will.

Stephen Timms: I agree that we have had a good debate, and I thank the hon. Member for South-West Hertfordshire (Mr. Gauke) for his kind welcome to me on my fourth arrival at the Treasury. I echo his tribute to my predecessor.
	The fiscal rules are a key element of the framework introduced in 1997 for long-term macroeconomic stability, which has ushered in the longest period of success in the economy that we have ever seen in the UK. Before it was introduced, fiscal policy frequently amplified, rather than dampened, the fluctuations of the economic cycle, and fiscal policy decisions were made against vague and shifting objectives. We all vividly remember the consequences of that: 3 million unemployed, twice; 15 per cent. interest rates; and record levels of repossessions and bankruptcies.
	The framework introduced in 1997 therefore marked a genuinely radical change. The code for fiscal stability, underpinned by legislation, sets out the principles for fiscal management enunciated by my right hon. Friend the Chief Secretary to the Treasury earlier in the debate, along with new reporting requirements and the role of the National Audit Office in the independent audit of key assumptions behind the forecasts. It promotes openness, transparency and accountability, just as the framework for monetary policy did after the Bank of England Act 1998. It puts better information in the public domain, the lack of which was one of the reasons for some of the past severe policy mistakes.
	Today's global economic challenges are certainly unprecedented, but the framework has made a big contribution to growth and stability in the UK economy over the economic cycle that began in 1997, with inflation and interest rates over the past 10 years averaging around half what they were in the previous two decades. The International Monetary Fund said recently that
	"for over a decade, the United Kingdom has sustained low inflation and rapid economic growth—an exceptional achievement...the fruit of strong policies and policy frameworks, which provide a strong foundation to weather global challenges".
	The fiscal framework has served our economy well. Net debt is lower as a percentage of gross domestic product in the UK than in all the other G7 countries except Canada, and in the euro area. During the economic cycle that started in 1996-97, net borrowing has averaged 1 per cent., compared with more than 3 per cent. in the previous economic cycle under the Conservative Government. The framework has improved transparency and increased the regularity of fiscal reporting. Fiscal policy has supported monetary policy, helping to smooth the path of the economy, which represents a break from the pro-cyclical fiscal policy of the past; and the golden rule has played an important part in breaking the bias against capital investment that so damaged public services. My hon. Friend the Member for South Derbyshire (Mr. Todd) made that important point earlier. Public sector investment is over three times higher as a share of the economy than it was in 1997-98, having risen from 0.6 per cent. of GDP then to 2 per cent. this year.

William Cash: I note the Minister's advocacy of the idea of maintaining a relatively low percentage of debt to GDP. Taking into account Northern Rock and Bradford & Bingley, what other proposals might the Government have that might increase the amount of indebtedness? Would the Minister resist such proposals from the Dispatch Box?

Stephen Timms: Contrary to the views expressed by the Conservatives, what we have done for Northern Rock and, indeed, Bradford & Bingley was absolutely the right thing to do. I do not think that it would be right to include the Northern Rock figure in the comparison for the sustainable investment rule, and that view is shared by the CBI, the Institute for Fiscal Studies and others. We will talk about the position in regard to the Bradford & Bingley figures in the pre-Budget report.
	It is absolutely right to focus on sustainable investment and prudent levels of debt, and we remain committed to that, and to the other fiscal policy objectives that we have pursued consistently since 1997. The objectives are: in the short term, to support monetary policy and smooth the path of the economy; and, over the medium term, to ensure sound public finances and fairness between generations.

Graham Stuart: The Minister has waxed lyrical about the positive impact of the fiscal rules. Will he reassure the House of Commons today that there will not be an announcement outside Parliament tomorrow of any great change to the rules—perhaps to dump them?

Stephen Timms: The hon. Gentleman is absolutely right about the benefits of the rules. Discipline through the framework saw net debt cut over the economic cycle that began in 1997-98 from 43.2 per cent. of GDP at the end of 1996-97 to 36.5 per cent. in 2006-07. That gives us the flexibility to support the economy through the current economic shocks, in particular through the automatic stabilisers and the targeted support that we have introduced for the least well off; so borrowing can rise this year to support families and businesses, while maintaining soundness in the public finances.
	We will not run risks with the public finances. The pre-Budget report will set out how we are striking the right balance between supporting the economy and taking the necessary decisions to ensure that the Government live within their means. The public finances remain on a sustainable path.
	The twin global shocks of the credit crunch and the surge in energy and food prices have hit every country in the world, including ourselves. The global shocks are unprecedented in their scope, their scale and the fact that they have coincided in time. We are determined to help families and businesses, supporting in particular those who most need support. Our priority is to navigate Britain through these challenges in a way that secures fairness, and we will renew our focus on economic stability.
	We are certainly a great deal better placed to weather these shocks than we were in the 1970s, the 1980s or the early 1990s. There are five reasons for that.

Philip Hammond: The right hon. Gentleman claims that we are better placed than we were at some other point in time, but the claim of the Chancellor and the Prime Minister has been that we are better placed than other countries. Does the Minister still maintain that position, in the face of all the evidence?

Stephen Timms: Yes, we certainly are. For example, we have had more people in work in the UK over the past few months than we have ever had before. The growth of GDP per head in the UK has been higher than that in any other G7 country. Those are changes that put the UK in a very strong position, compared with others.
	There are five reasons for this. First, Bank of England independence has given us interest rates and inflation well below the double-digit levels that we saw in earlier decades. Secondly, our labour market is the most flexible in Europe, with employment remaining high and more than half a million job vacancies. Wage pressures are subdued, thanks in no small part to our decisions on public sector pay. Thirdly, Britain remains one of the best places in which to do business and is a magnet for overseas investment. There was more foreign direct investment in this country last year than in any other country in the world except the United States. Fourthly, thanks to decisions made since 1997, public debt remains low by historical and international standards. This means that we can provide targeted support to those who need it most, and protect investment in our infrastructure. That investment was sacrificed in previous downturns, but it will in truth underpin our future growth, which is why we need to maintain it. Fifthly, we have taken the long-term decisions to boost competitiveness—on energy, planning, transport, housing, science, skills and digital technology. However, there is no ground for complacency. Britain unquestionably faces great challenges. But we are facing them from a very strong foundation.
	Our immediate priority is financial stability. As my right hon. Friend the Chancellor spelled out yesterday, we will do whatever it takes to ensure that stability is maintained. We have taken Northern Rock and part of Bradford & Bingley into public ownership—overcoming opposition from the Conservative party—thereby protecting depositors and making sure that such problems did not spread. We have introduced extraordinary amendments to the competition regime so that the merger of Lloyds TSB and HBOS could go ahead quickly. We have tackled directly the problems of liquidity in the banking system. The FSA has imposed a temporary ban on short selling to help to calm market volatility—again, in the face of opposition from the Conservative party.

William Cash: Is there any question in the Minister's mind of overriding European law by using enactments passed in this place to achieve the objectives that he has described in relation to the problems of competition policy?

Stephen Timms: No. I am absolutely confident that what we have done is not only right but, given the variety of legal constraints, appropriate. We will proceed with it.
	Supporting the banking system in that way is essential, not only for financial institutions but for businesses and individuals who rely on them. In the longer term, we will continue to build on the success of the UK economy over the past decade. We will work with other countries in tackling the twin global shocks, and will maintain our hard-won economic stability, supporting the economy and keeping inflation low. The principles and objectives set out in the framework remain right. We will ensure that the framework remains sufficiently flexible and robust to cope with the challenges that we face.
	Let me comment on some of the interesting points made in the debate. The hon. Member for Runnymede and Weybridge (Mr. Hammond) introduced his party's proposals, which were interesting to hear. It struck me that he was generous in giving way during his speech until he reached the section on his party's proposals for a new framework. At that point, he wanted to rush to the end as quickly as possible and avoid answering questions. Clearly, some interesting ideas have been put forward, but there is a great deal of vagueness on the detail, such as on what the forecast period would be. Many detailed points were raised in interventions, but, sadly, as in many other areas of Conservative policy, the detail is missing.
	The contribution of the hon. Member for Twickenham (Dr. Cable) was characteristically thoughtful and helpful, not least in making some trenchant observations and criticisms of the Conservative party's policies. I enjoyed the contributions of my hon. Friends the Members for Luton, North (Kelvin Hopkins) and for South Derbyshire (Mr. Todd), who is right to draw attention to the way in which we have maintained capital investment. Total schools capital investment has risen from less than £700 million in 1997 to £6.4 billion this year. The removal of the need for classroom roofs to be supported by pit props is among the benefits of that.
	I was grateful to the hon. Member for Gosport (Sir Peter Viggers) for his kind remarks. I agree with him about the decisions made in 1997, which he supported. Of course, I also support the other decisions that were made. In relation to the arrangements introduced in yesterday's legislation on dormant accounts, a long-term process is envisaged. I noticed that the House did not divide on those proposals.
	The hon. Gentleman raised the question of remuneration in the financial sector. The issue is about undesirable incentives towards excessive risk taking, which we have undoubtedly seen. That is why the FSA has said that it will take more account of financial institutions' remuneration structures in its risk assessment of banks, and that is the right approach.
	The hon. Member for Stone (Mr. Cash) queried some of the figures. Let me make the point that the Office for National Statistics figure to which he referred was general Government gross debt rather than public sector net debt, the figure to which I referred—36.5 per cent. in 2006-07, rising to 36.8 per cent in 2007-08.
	We do not take risks with stability in the economy. By taking the right decisions, we can make sure that Britain continues the success of the past decade and meets the challenges of the next, building greater prosperity and fairness. The Monetary Policy Committee has been acknowledged in the debate as a cornerstone of the successful economic policy frameworks that have delivered sustained growth and, on average, lower inflation than in the euro area and the United States. We firmly support the 2 per cent. inflation target, and will support the Bank of England's Monetary Policy Committee in the decisions it takes to ensure that inflation comes back to target within the next couple of years.
	We remain fully committed to the fiscal policy objectives that we have pursued consistently since 1997. The pre-Budget report will set out how we are striking the right balance between supporting the economy on the one hand and ensuring that the Government live within their means and that the public finances remain on a sustainable path on the other. We will continue to act on our commitment to develop secure, efficient, stable and fair financial markets. We are strengthening the financial stability framework that we put in place in 1997, which has worked well.
	As my right hon. Friend the Chancellor set out yesterday, however, the Banking Bill—introduced earlier today—will enhance our ability to respond to difficulties in the financial sector by: strengthening early regulatory intervention and liquidity assistance; providing the authorities with permanent powers to deal with failing banks; strengthening depositor protection through the financial services compensation scheme; and putting in place a new statutory role for the Bank of England in preserving financial stability.
	The problem for the Conservative party is that its philosophy simply does not work in times such as these. It wants to see Government withdrawing—doing less. That approach simply cannot work in such testing times— [Interruption.]

Mr. Deputy Speaker: Order. There is too much noise in the Chamber. I need to hear the right hon. Gentleman's winding-up speech.

Stephen Timms: The approach simply cannot work in such tough times. That is why Conservative Front Benchers have got all the key judgments wrong in the past few weeks. They were wrong on Northern Rock, wrong on Bradford & Bingley, and wrong on short selling. People are noticing their approach. As the  Financial Times said this morning,
	"they have developed a habit of calling on the Government to take action that is already in the pipeline."
	The framework undoubtedly faces its toughest test since it was introduced a decade ago. It has served us extremely well. We will come through the test with renewed confidence. Over the past decade, we have taken the right decisions for a strong and stable economy. Now we are taking the right decisions for continuing prosperity. That is the right approach, and I ask the House for its support.
	 Question put, That the original words stand part of the Question:—
	 The House proceeded to a Division.

Mr. Deputy Speaker: Perhaps the Serjeant at Arms could start by investigating what is happening in the No Lobby and then, if necessary, investigate what is happening in the Aye Lobby.

The House having divided: Ayes 222, Noes 296.

Question accordingly negatived.
	 Question, That the proposed words be there added,  put forthwith, pursuant to Standing Order No. 31 (Questions on amendments), and agreed to.
	Mr Deputy Speaker  forthwith declared the main Question, as amended, to be agreed to.
	 Resolved,
	That this House notes that the purpose of the fiscal framework is to smooth the path of the economy in the short term, to secure sustainable public finances in the medium term and to ensure that spending and taxation impact fairly between generations; recognises the success of the framework over the past decade, reversing historical under-investment in the infrastructure of public services, reducing debt from 43 per cent. of GDP in 1997 to below 37 per cent. last year and allowing borrowing to increase this year in order to support the economy; welcomes the £4 billion of tax cuts helping families and businesses this year; further notes the turmoil in the world economy and financial markets; recognises that Government is rightly focused on the turbulence in the financial markets and helping families and businesses with the twin shocks of the credit crunch and high commodity prices; and welcomes the Government's commitment to take whatever steps are necessary to protect the stability of the financial system.'.

Unemployment in the UK

Mr. Deputy Speaker: I have to inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister. I must also announce to the House that I am placing a 12-minute limit on Back-Bench speeches in this debate.

Chris Grayling: I beg to move,
	That this House notes with concern the recent increases in unemployment, and the widespread forecasts that the total may rise in the months ahead; further notes that the UK already has almost five million people in receipt of out of work benefits; and calls on the Government to implement measures to help British business secure existing jobs and to improve the back to work support available to those who do become unemployed.
	Before I begin my remarks, may I welcome the members of the rather extensively new Department for Work and Pensions team to their positions? There has been a big change in the departmental ranks, but we on the Conservative Benches look forward to debating with all of them in the weeks and months ahead.
	Much of the media attention over the past couple of weeks has rightly been on the crisis in the financial markets, which was the subject of the earlier debate this afternoon. In the second debate today I want to turn the attention of the House to an issue that is becoming an increasingly big concern for people around the country: unemployment. None of us wants to see the unemployment rate rise. We all hope that the gloomier forecasts about unemployment prove to be over-pessimistic, but the truth is that things are getting worse, and not only in the financial services sector. Yesterday, we had 600 jobs lost at the automotive firm LSUK in Sheffield. One thousand people per day are currently joining the dole queue. Unemployment is up by more than 40 per cent. in some areas. Employment is falling; vacancies are down by 60,000, and youth unemployment stands at more than 1.25 million.

Chris Ruane: The hon. Gentleman mentioned employment levels, so may I inform him that in 1997 the employment level in my constituency was 23,000 and in 2007 it was 29,000? Does he know the employment levels for his constituency over that period?

Chris Grayling: The hon. Gentleman will find that the headline figures on employment levels that the Government and Ministers have been bandying around in recent weeks do not tell the whole story, and I shall return to his remarks shortly.
	People up and down the country are worried about their jobs and businesses, and they are worried about the future. The worry is that this Government have been complacent about unemployment. Again and again, as the economic storm clouds gathered, Ministers have sheltered behind optimistic claims about their record on employment as a justification for their belief that Britain is somehow better placed to deal with the economic challenges that we face. They have claimed that Britain had "record employment" and that long-term unemployment has been "virtually eradicated". Only four weeks ago, the then Minister for Employment and Welfare Reform said:
	"And we have grasped the opportunity to lift the rate of employment to a historically high level, with more people in work in Britain today than ever before in our history, and to reduce unemployment to levels not seen since the 1970s."
	That remark does not entirely reflect the reality behind the scenes in the small print.

Philip Davies: My hon. Friend rightly said that people are concerned for their jobs, and nowhere is that more the case than in west Yorkshire. It faces the combined effects of what has happened to HBOS and Bradford & Bingley, which are based in my constituency. Does he agree that although the Government have been keen to safeguard Northern Rock jobs in Newcastle and jobs in Scotland—through the deal that they cobbled together with Lloyds TSB and HBOS—it is just as important to safeguard jobs in west Yorkshire? Does he also agree that everything should be done to try to help that local economy, which will be devastated by the combined effects of what is taking place?

Chris Grayling: My hon. Friend makes an important point, and he speaks out clearly in defence of the interests of the people of west Yorkshire. We should be concerned about employment in both Bradford and Halifax, given what has happened in the past few weeks.
	After 10 years in power, Ministers need to spend a bit more time in the real world, because as always with this Government, when one reads the small print, one sees that there is a much more sober tale to tell. Ministers tell us that they have created 3 million more jobs, but they do not tell us that about 80 per cent. of them have gone to migrant workers. If one uses the International Labour Organisation measure of unemployment, which, in opposition, the Prime Minister used to prefer, one is told that the jobless total has fallen by only 300,000 over 10 years of continuous economic growth. Almost 5 million people in Britain are claiming out-of-work benefits. The rate of economic inactivity—one in five—is pretty much unchanged from 1997. Some 5 million people in Britain do not have any formal qualification, and the employment rate for those lower-skilled workers has fallen under Labour. Britain's employment growth last year was among the lowest in Europe; it was higher only than in Hungary and Portugal.

Brian H Donohoe: Does the hon. Gentleman really think that this debate is of value to the British people? Talking down the economy instead of talking it up is the poison that is bringing about the uncertainty in our constituencies. My constituency contains companies that are taking on apprentices for the first time in a generation and companies that are expanding by the day. I do not need to hear drivel being talked; the economy does not need to be talked down.

Chris Grayling: It is only understandable that Labour Members will not like being told the truth about the Government's record on employment, but if we are to address the problem of rising unemployment, we should at least start by recognising the scale of the challenge.
	The reality should not be buried in the small print. A perfect example is the Government's claim that long-term unemployment has been "virtually eradicated". In fact, they have made it statistically impossible to be long-term unemployed. Young people who claim jobseeker's allowance for six months and over-25s who claim for more than 18 months are automatically referred to the new deal, and if they fail to find a job initially on the new deal, they are referred to a period of mandatory training. At that point, claimants are moved off JSA and on to a training allowance, and are removed from the Government's official claimant count. At any one time, about 40,000 people are hidden from the Government's official claimant count in that way. About one in three people leaving the new deal return straight to benefits, at which point they rejoin the claimant count, their previous claim is wiped clean and they appear to have only just become unemployed. Under the Government's current system, it is possible for people to be have been unemployed for more than two years, but for them to appear to have been on benefits for only two days.
	Some of the other hidden statistics are equally worrying. According to official figures, 700,000 people who would like to work full-time are working part-time because they cannot find full-time work. Employment among British-born, British nationals is falling fast; 250,000 fewer UK nationals are in employment than two years ago. Until now, this Government have got away with their failure to address the underlying weakness in our labour market, but it is about time that they stopped denying that there is an unemployment problem in this country and started listening to those who are already struggling.
	We know that the consequences of those employment failures are not just limited to adults; child poverty is up for the second year in a row. The UK has a higher proportion of its children living in workless households than any other EU country. Almost 1.3 million young people aged 16 to 24 are not in work or full-time education—that is a 19 per cent. increase on the 1997 figure.
	How should we begin to tackle the problem? First, we must do everything possible to help those who are unfortunate enough to lose their jobs. An important first step would be to accelerate the process of welfare reform—to turn some of the things on which the Secretary of State and I have agreed into reality now, rather than in two years' time or more. People think that talking about welfare reform at a time of rising unemployment is a contradiction in terms; how can one introduce big new changes to the welfare-to-work process when the number of jobs is falling? That is not the right view to take, because we know about the experience from the other side of the Atlantic. When I went to New York in January to look at welfare schemes, I asked people about coping during the recession of the early 2000s. I was told that the introduction of innovative employment programmes, which helped to match people and their skills with the opportunities that were available, helped to make a difference to the rise in the claimant count. The rise in the number of unemployed was less pronounced than it had been in previous recessions.
	We understand that times have changed and that Britain is facing a tougher economic climate. If anything, that makes the case stronger for a fairer, more active welfare system. With the publication of our green paper on welfare reform in January, and the Secretary of State's subsequent decision to adopt both David Freud's proposals and ours, there should be cross-party consensus on what needs to be done—so why the wait? The Government will have our backing if they accelerate the reform process, and now is not the time to be timid.
	People who lose their jobs will need individualised support to reflect their needs. They will need tailored employment programmes that offer, among other things: job search facilities; specialised training to increase suitability for work; personalised career and recruitment advice; interview training with employers; and CV-writing techniques. The reforms that we have all discussed would lead to the creation of a world-leading back-to-work system, through centres all around the country delivering the necessary support.
	We have some of those skills in Britain already, but as the Government's amendment so clearly reveals, the programmes that are in place barely scratch the surface of the challenge we face. That is why we need to accept the accounting changes that allow the use of benefit savings to help pay for the programmes that get people back into work—the so-called DEL-AME, or departmental expenditure limits-annually managed expenditure, switch. It is no good piloting that change sometime after 2010, because it is needed now. Without it, we cannot build the scale of programmes needed to meet the nature of the challenge we face. The biggest problem with the Government's Green Paper in the summer was that everything seemed to be timetabled for years down the track. I offer the Secretary of State our support in changing that and getting on with things now.
	We need to do more to protect the jobs that we have. In the last recession, I worked for a small company in Winchester. Out of the blue, our biggest customer went bankrupt and we did not even have enough money to pay the salary bill at the end of the month. It would have been easy for the bank to pull the plug, but we were lucky and it did not. With a real team effort, the business pulled through, but many others in that position are not so lucky. Loans can be called in and businesses can collapse almost overnight. We need to take steps to protect good businesses that suffer a sudden problem of that kind.

David Wright: The hon. Gentleman will know that local authorities provide a lot of employment. Can he predict what would happen to local authority jobs if there was a freeze on council tax?

Chris Grayling: I am sorry that the hon. Gentleman does not appear to believe that, given the financial and cost-of-living pressures on pensioners, freezing the council tax is a good idea. We happen to think that it is, and I would be delighted to argue the case with him on the doorsteps of pensioners in my constituency and elsewhere.
	We need to take steps to protect small businesses that face a sudden problem, especially in the current climate of difficult times and in the months ahead. At the moment, our insolvency rules do not do enough to stop those firms going under. That needs to be changed as a matter of urgency. The United States has a special system for companies in that position, called chapter 11. The system allows companies in difficulties enough time and protection to sort things out. A similar system should be introduced in the UK. It would allow company directors the time to formulate a plan to rescue or restructure the company. It would not save lame ducks, but it would give good companies a breathing space when their financing was put under pressure by world events or a sudden, unexpected and unwanted hiccup, such as a supplier failing to supply or a customer going bankrupt.
	The current insolvency system often means that the only option is to close down the business, destroying livelihoods and creating significant job losses. If we were to adopt the proposed reforms that we have set out, introducing a chapter 11-style system, it would create a breathing space that allowed company directors to formulate a plan to rescue or restructure a company.

Ian Taylor: My hon. Friend is making an important point, and I hope that it will not be lost in party political jibes from the Labour Benches. At the moment, many companies that are well run have severe credit problems because of the banking crisis, in which the banks are not lending to each other, let alone to companies. In these circumstances, well-run companies may be short of credit and in a situation in which they and their creditors do not have time to come to some arrangement, as they would in normal conditions. We are in a crisis, and we require crisis thinking on a collaborative basis, so I welcome my hon. Friend's contribution.

Chris Grayling: My hon. Friend makes his point well. In the next few weeks, we must all be careful not to use rhetoric against the financial services sector and the banks that ends up being counter-productive. The reality is that our banks play a crucial role in the fabric of our economy. The disappearance of credit facilities affects individuals and small businesses and could, as my hon. Friend rightly says, force otherwise good businesses into receivership. We wish the Government well in their efforts to ensure stability for our banking system. We also need protection in place for businesses that run into unexpected difficulties that, given time, they might be able to trade through.
	If the Government accept the principle behind our proposals, there are three elements to our plan. The first is to introduce an automatic stay of enforcement. That would prevent banks or other creditors from intervening immediately to enforce repayment of debt while the management stays in place and attempts to negotiate a restructuring. The second is to give a priority status for any financier willing to provide ongoing funding for the company post petition. Unlike in the UK, firms in chapter 11 in the US are able to raise finance even after they have petitioned for bankruptcy. Lenders will lend them money in exchange for "super-priority" over other unsecured creditors. In fact, there is a whole market for such rescue funding in the US. Introducing such a market in the UK could help to protect businesses and jobs.

Stewart Hosie: If companies had a stay of execution and the chance to seek private finance, would the hon. Gentleman envisage reversing the Government's recent changes to the capital gains tax regime to make that an attractive proposition? If not, what changes would need to be made to capital gains tax?

Chris Grayling: The experience in the US suggests that such tax changes might not be necessary. We are not in a position now to write the next Budget, but the opportunity to lend to a business that has the potential to recover and is otherwise fundamentally sound, in exchange for super-priority status, would be attractive to investors in any case.

Terry Rooney: I am sure that the hon. Gentleman does his homework, because he is quite bright. Does he not realise that most large US companies that go into chapter 11 dump their pension liabilities on the US equivalent of the Pension Protection Fund, and their employees suffer horrendously? That is how those companies get afloat again. For example, every major US airline has done that. What it means is that somebody somewhere suffers and pays for those companies to stay in business. It is not a no-risk proposition.

Chris Grayling: Right now the priority in this country should be to protect jobs. We are not talking about an exact replication of the US system, but about taking the best from it and applying it here. If a business is in difficulties, it may be better for change to be negotiated within the business, instead of seeing the kind of failure that faces Alitalia, with tens of thousands of jobs at risk in Italy because the unions and the management could not agree on a rescue package.
	The point about the chapter 11 system is that it allows time for discussions on securing the future of the business. The hon. Gentleman may not appreciate the problem; at the moment, the banks can come in, literally overnight, and close a business down. The jobs go and the business is completely lost. We are arguing for a stay of execution, so that otherwise decent businesses that are experiencing hiccups have a chance to survive, especially at a time like this. Under the current regime, the danger is that that will not happen.

Ian Davidson: Is the hon. Gentleman aware that none of this would be necessary under the plans recently announced by the Scottish Executive, who have told us that all the money needed for every public and private scheme will be borrowed from the Government of Qatar? Does he believe that that is likely to happen?

Chris Grayling: It sounds a tad implausible, but I am sure that it will lead to lively debate in Scotland. Sadly, I fear that businesses in Scotland will not be immune to the present problems. The changes for which we are arguing tonight would also apply to businesses in Scotland, Wales, Northern Ireland—indeed, across the UK.
	The third element of reform that is needed is to prevent unscrupulous creditors from vetoing desirable restructurings. Once a company had proposed a restructuring plan, it would be required to submit it to the court, along with any supporting evidence. Any creditor group that disputed the plan would also be able to submit evidence, but once the court and a majority of creditors had approved the plan, it would bind all of them.
	Taken together, these reforms may provide the right framework to allow good companies to continue to trade during an economic downturn. I sincerely hope that the Government will adopt these proposals now. British business cannot afford to wait to the next election for a set of reforms like this. We face tough challenges today and I hope that the Government will accept the reforms in a good spirit and implement them as soon as possible.

Rob Marris: The hon. Gentleman's party has had a Damascene conversion on unemployment, and I welcome that. I also welcome his position that more regulation is appropriate, rather than a free-for-all. I shall try to tempt him a little further. Would he care to distance his party from hedge fund managers, spiv short-sellers and arbitrageurs, some of whom have been funding his party?

Chris Grayling: I am very surprised that any Labour MP would want to draw attention to that issue today given the fact that only last week the Prime Minister appointed the senior director of a City fund that has been involved in short trading to his Government to serve as City Minister. I am baffled by why any Labour MP would want to try to turn the mirror on the Opposition—Labour should be answering those questions, not anyone who sits on this side.

Ian Taylor: I apologise to my hon. Friend for intervening twice. The simple fact is that anyone who was selling short in the city was borrowing stock in order to do so. Guess who was lending the stock? It was the pension funds and other so-called Labour-approved reputable trading bodies. I think we need a little less sanctimonious crap from Members opposite.

Chris Grayling: My hon. Friend makes his point succinctly. There will come a time when all the events that have taken place in the financial markets in the past few weeks will of course need to be addressed, but right now our duty as a House of Commons and as a nation is to seek stability in our economy and to take the steps that we need to take to protect jobs, to protect businesses and to ensure that we can look after those who are unfortunate enough to lose their jobs. The other big step that the Government need to take to protect business and jobs is on tax. It cannot help employment prospects in this country if some of our biggest firms are transferring their headquarters and domiciles to other countries so that they can take advantage of favourable tax regimes in places such as Ireland. That cannot help the employment prospects of people in this country either. That is why we continue to argue that we need to cut the main rate of corporation tax from 28p to 25p and to reverse the Government's planned increase in the small companies rate from 20p to 22p. The costs of such a reform can be met by dramatically reducing the complex structure of allowances that the Government have introduced for business. We need a simpler and more attractive tax regime in this country that makes it attractive to do business here, that protects jobs and that attracts employers to this country in the future.
	I sincerely hope that unemployment does not rise as far and as fast as some are predicting.

Sammy Wilson: The hon. Gentleman's point about corporation tax, which has been mentioned and which particularly affects companies in Northern Ireland because of the land boundary, has been resisted strongly by the Treasury. Does he agree that the experience of the Irish Republic, where a lot of inward investment has attracted a high percentage of EU inward investment as a result of the low corporation tax rate, proves his point? Corporation tax is an important incentive for firms, and we cannot understand why the Treasury has resisted the idea.

Chris Grayling: The hon. Gentleman makes an extremely fair point. We feel strongly about that issue, and that is why we have argued for the reforms and why it remains our aspiration, when economic circumstances permit and when we are able to share the proceeds of growth, to bring down the tax burden on business and on individuals in this country so that we do not lose major corporations to other countries. We cannot afford to do that.

Albert Owen: Does not the hon. Gentleman find it ironic, as I do, that all those tax incentives are in the Republic of Ireland, yet the Republic of Ireland was the first European country to go into recession? That is very problematic for the future. Does not he agree that what we really need is stability so that we do not have a sharp downturn, as we have seen in the Republic of Ireland?

Chris Grayling: We clearly need to achieve economic stability in this country and in other parts of the world. There is no doubt about that. Economic stability is the only environment in which to do business and it is a tragedy that we have gone from a boom to a bust in this country despite being told by the Prime Minister that there would be no more boom and no more bust—that somehow we had got over that, as he had changed the laws of economics. However, it was not like that, and our businesses are paying the price today.

Paul Rowen: I have listened to the hon. Gentleman's proposals with some interest. Will he tell the House what he envisages will be the cost of his welfare reform proposals and the other changes, such as the chapter 11 changes? What does he envisage will be the net saving in the number of jobs that he expects his proposals to save?

Chris Grayling: There are two key elements to my argument today, and the chapter 11 proposals would have no cost impact. On the subject of bringing forward the welfare reforms, since the Secretary of State has assured us regularly over the past few weeks that his proposals carry no extra cost, I assume that bringing them forward earlier would indeed carry no extra cost. It is merely a question of getting on with the job faster.
	I sincerely hope that unemployment does not rise as far or as fast as some are predicting, but we need to be ready if it does. It will not help tackle the problem if the Government continue to bury their head in the sand about the true scale of worklessness in the UK. We need measures to protect small business and to help it grow. We need better support for those who do lose their jobs so that we can get them back into work as quickly as possible.
	We have heard boast after boast about the Government's record on employment in the past few months—boasts that do not pass muster under scrutiny. So, we have had enough of the complacency and enough of the empty rhetoric about a record on employment that just does not reflect the reality. Let us see some real action before things can get any worse.

James Purnell: I beg to move, To leave out from 'House' to end and to add instead thereof:
	"notes the global economic challenges that are facing the UK; congratulates the Government on policies such as Local Employment Partnerships which have helped nearly 40,000 people find work, Pathways to Work which has supported more than 94,000 people off Incapacity Benefit and into work, and the New Deal which has helped 1.97 million people into jobs; welcomes the policies of this Government which seek to reform the welfare state to give people active support to get back into work as quickly as possible; and supports rapid action to ensure that where redundancies occur people are given the personalised support they need to return to work, to intensify the activity of the welfare state to ensure no-one is written off and to maintain a strong and flexible labour market.".
	I was rather sad to hear the partisan tone adopted by the hon. Member for Epsom and Ewell (Chris Grayling). This is an important issue for our constituents and I think that it would be better if we debated it in the spirit in which I thought that the hon. Gentleman's leader said that he would approach this economic challenge. That spirit was that we should try to work together to address these issues. I shall try to address the points that the hon. Gentleman made and some of his rather eccentric use of facts. I shall then turn to his proposals and try to explain that all his main points are already Government policy. We are glad that he already agrees with what we are doing on employment and on the insolvency regime.
	It is right that we should debate the subject tonight, and I am glad that the hon. Gentleman called the debate. Over the last two days, we have rightly discussed in this Chamber the financial situation and the global economy. All parties agree that there is no way that Britain could not be affected by the international situation. We could not stop the world, even if we wanted to get off. We need to maintain our open economy and to do everything we can to protect people through the current financial and economic situation and to prepare them for the upturn that will come thereafter. That is exactly what the Government are doing.
	Our constituents tell us that they know about the drama on Wall street and Threadneedle street, but they want to know what the ripple effect will be on their high streets. The hon. Gentleman said that we should be living in the real world, but that is what we do. Last week, I spent two days in the high street in Kentish Town at the Jobcentre Plus, talking to advisers and to people who have just started to claim. The interesting thing was that there was a steady flow, as there always is, of people signing off benefits, because they have found work, and a flow of people coming in. People asked two questions: first, what is happening in the economy, and secondly, what are the Government doing? I want to talk about both those things and will try to address the points that the hon. Gentleman made.
	Let us start with the facts. The latest analysis of the labour market makes it clear that unemployment is rising. The number of people claiming jobseeker's allowance has been going up since the beginning of the year. In the last month, it went up by just over 32,000. Inflows on to jobseeker's allowance are now at 250,000 people compared with 200,000 earlier in the year. The steady flow of people in and out that I mentioned seeing in Kentish Town is reflected in the wider economy. At the same time as 250,000 people were flowing on to the allowance, 216,000 people flowed off in August. That is because we have a strong, flexible labour market that is one of the best in the G7.
	The hon. Gentleman tried to make some points about that, but he could not detract from the fact that we have the second highest employment rate in the G7. He cannot detract from the fact that there are 600,000 vacancies in the economy or that 500,000 people start a new job every month. Every time someone loses their job it is a worry, and it is a tragedy if they cannot find the next one. We should all be focusing on exactly what we can do to ensure that people find their next job as fast as they can as well as protecting existing jobs.
	Let me correct some of the things that the hon. Gentleman mentioned. He said, for example, that it is not true that employment has been at a record level this year—he quoted an example of that being said earlier this year. Over the past 11 years, the employment rate has been at 74.3 per cent., compared with 71.4 per cent. under the Conservative Government. There has been a significant rise in the employment rate in this country. It is the highest employment level that has ever been achieved in this country. We are coming from a high level and it is therefore wrong for him to say that the economy has not had a successful labour market over the past few years. It is wrong for him to say that 80 per cent. of those jobs have gone to migrants. That figure is simply wrong. The figure is 50 per cent. and 800,000 more UK-born people are in work than there were in 1997. It is wrong of him to say that the inactivity rate is at 20 per cent. That includes students, whose numbers have risen very significantly over the last 11 years, and I thought that that was something that those on the Conservative Front Bench supported. If the number of students is taken out, the inactivity rate has fallen significantly.
	It is wrong to say that long-term unemployment has not fallen as, even under the ILO measure that the hon. Gentleman quoted, it has gone from 800,000 to 354,000. It has fallen by more than half, so the figures that he tried to quote were, I am afraid, wrong. In his motion, he states that 5 million people are inactive, but that figure includes carers, people who have been recently bereaved, and parents with children under five. Even he does not want to see them in work. Will he confirm that that 5 million figure includes all those people? Is he saying that all carers should go back into work, or that the 5 million figure is a completely inappropriate way of describing the inactivity rate?

Chris Grayling: The Secretary of State's point about carers is right, but will he confirm that he is now proposing to move them on to jobseeker's allowance rather than income support?

James Purnell: Yes. That is exactly what we are proposing. We want to simplify the benefits system, which is something that Front-Bench Members of all parties agree with. I hope that he will say in future that he does not recognise that 5 million figure, which is a totally inappropriate way of describing inactivity. If he wants to continue using it, he will have to make it clear to carers that he is expecting them to look for work.

Chris Grayling: What about conditionality?

James Purnell: We are not going to change the conditionality regime for carers. Is the hon. Gentleman saying that he wants carers to look for work? If not, he should he say that he will no longer use the 5 million figure because it is deeply—

Chris Grayling: It is true.

James Purnell: No, it is not true. I think that "eccentric" is the most parliamentary way that I can put it.

Chris Grayling: So can I take it that the Secretary of State does not believe that there are many people among those carers who would like to work if we provided the right care and support for their families, and the right job opportunities for them? Does he not agree that, if we develop a world-leading back-to-work system—and I trust that we will—it should be open and available to carers, to help them find the opportunities to do more than simply be full-time carers?

James Purnell: Basically, Mr. Deputy Speaker, I think that that shows that the hon. Gentleman agrees that the 5 million figure is not the right one for him to use. I hope that he will not use it in future.
	I want to make it clear to the House that we have not been sitting on our hands. We have not been complacent. For the last six months, my Department has been preparing for a wide range of economic scenarios. I want to take the hon. Member for Epsom and Ewell through what we are planning to do. There are three lessons in particular that I want to share with him.
	The first lesson is that we should maintain the active approach to getting people back to work. We have looked at the lessons of our labour market history, and the worst possible thing that we could do at this moment is to relax the activity and obligations required in our back-to-work system. How do we know that? We know it because it is exactly what the Conservative Government did in the 1980s, when they took all conditionality off unemployment benefits. That meant that unemployment rose further than it need have done, to 3 million.
	We will not repeat that mistake, and we will maintain the conditionality in the system. Why will we do that? We will do it because conditionality means giving people support and requiring them to take it up. If it is more difficult for people to find work, it would be extraordinary at this stage to start relaxing that conditionality or to provide people with less support.

Tobias Ellwood: May I take the Secretary of State back to his statement that only 50 per cent. rather than 80 per cent. of jobs went to UK people, and that that was where the Government were focusing their efforts? Does he think that 50 per cent. is still acceptable?

James Purnell: Are the Opposition saying that they do not want any migrants to come to this country? Is that the policy of those on the Opposition Front Bench? We think that having a positive approach to migration's contribution to our economy is important. We think that migration has to be managed, and we are bringing in the points-based system because we think that it will help us to do that. We think that it is right that migrants should contribute to our economy. If Opposition Front-Bench Members do not believe that, they should say so. I was merely pointing out that the figure used by the hon. Member for Epsom and Ewell was wrong.

Ian Davidson: I want to make a point about conditionality. Does my right hon. Friend agree that simply asking people to turn up and participate in training is not sufficient and that, in some circumstances, we need something like the old community programme? People should be given the opportunity to go into meaningful work to get them into the habit of attendance. Something like that would be immensely constructive, especially at a time of declining economic circumstances. Will he introduce it tomorrow?

James Purnell: I cannot quite promise to do it tomorrow, but my hon. Friend will be glad to know that the flexible new deal will do exactly what he describes. It will require people to do mandatory work in return for their benefits. As he knows, we said in our welfare reform Green Paper that we would expect people gradually over two years to be looking to work for their benefits. I am sure that he will support us in that approach as well.
	My hon. Friend is absolutely right to say that we need an active approach to getting people back to work, The hon. Member for Epsom and Ewell quoted at length from his recent document "Labour isn't working...again", in which he said that he wanted a network of back-to-work centres around the country that would make sure that there was an
	"immediate assessment of every individual's skills and barriers to work".
	Well, we do that now in jobcentres. The hon. Gentleman also says that he wants
	"individualised support to reflect individual needs",
	with job search facilities, CV writing and interview training. We do that already. He says he wants to harness
	"the innovation of the private and voluntary providers",
	but we do that already. We do not need to reinvent a network of back-to-work centres around the country. Those centres are called Jobcentre Plus, and they are in all our communities. If the hon. Gentleman wants to visit the one in his area, it is at 50, East street, Epsom, Surrey. I suggest that he goes and finds out what is really happening, rather than presenting our policy as his own.

Chris Grayling: Will the Secretary of State give way?

James Purnell: I have given way to the hon. Gentleman enough already. [Hon. Members: "Oh!"] Very well, I give way.

Chris Grayling: Does the right hon. Gentleman really believe that Jobcentre Plus offers the scale of back-to-work support that is needed, and that it replicates what is done in the back-to-work centres in north America? If he does believe that and that is the extent of his aspiration, it is profoundly depressing.

James Purnell: Jobcentre Plus is better than what is offered in America. I visited back-to-work centres in New York, and people queue for hours. Often, they are sent back at the end of the day. They get no advice on getting back to work, and there is a total separation between claiming benefits and back-to-work services. From that Dispatch Box, the hon. Gentleman has just insulted the people who work for Jobcentre Plus in this country. That insult will be noted around my Department, and he should retract it.

Albert Owen: The Secretary of State is right to praise the role played for many years by Jobcentre Plus and the jobcentres in getting people back to work and tailoring support to their needs. However, even at a time when the economy is so precarious, there is a proposal to close some jobcentres in my constituency and in four other areas in Wales. Will he take that proposal on board? Will he meet me, or instruct the area managers to withhold or suspend the proposed closures at this important juncture? People need the extra support that the centres give, especially in areas of historically high unemployment

James Purnell: I should of course be very happy to meet my hon. Friend, but the closures have been proposed because my Department has met some very significant targets, with claimant count in those areas falling from 130,000 to 100,000 and there is another 12,000 headcount reduction. We have looked at a range of economic scenarios to see how the system would react to different levels of claimant count. We are confident that the system is robust, not least because an increasing amount of work is being done by telephone and over the internet. It is right that we do what needs to be done face to face in jobcentres, but the rest can be done by telephone and over the internet. However, I can reassure my hon. Friend that we have already decided to keep on some of the extra people whom we will recruit for the introduction of the employment and support allowance. They will be kept on to help deal with the very problem that he has identified, but I shall of course be happy to talk to him about the specific point that he raises.
	The hon. Member for Epsom and Ewell, rather than demeaning the work of Jobcentre Plus, should recognise the world-class work that it does. It has been recognised by the National Audit Office very recently, and he should accept that 60 per cent. of people go back to work within three months, that 80 per cent. go back within six months, and that 90 per cent. do so within a year. That is a very good record, but we want to go further. We want to strengthen the regime further, so we are making sure that people sign on for skills when they sign on for work. We will modernise our new deals and bring them into a single, flexible new deal, so that they can respond to personal needs. As I said earlier, there will be a period of 12 months' intensive support with four weeks of mandatory activity, and we will fast-track people with greater needs on to the new deal. They will include people who have not been in education, employment or training when they turn 18, or those who are ex-offenders.
	The regime is world class. We have been planning for these economic contingencies, and we have been strengthening the system. The first lesson of the past 20 years in this country is that the activity of the system should not be relaxed. We need an active system, rather than the passive one that existed under the previous Conservative Government.
	The second thing that we will not do is to repeat the mistake of the previous Government of massaging the figures to pretend that the numbers are not changing. We will not shift people on to incapacity benefit and consign them to a life trapped on benefits without any kind of support, as a way of keeping the headline figures below what they really are. I can give the hon. Member for Epsom and Ewell that commitment, and I hope that he will match it. We will not manipulate the figures in the way that he did. We will not move people on to inactive benefits when they should be on active benefits. In fact, we shall be doing exactly the opposite; we will make sure that people are moved on to active benefits precisely because that is the right thing for them and their families.
	The hon. Gentleman may want to listen to the third lesson of the changes, as for once I am about to agree with him. He is absolutely right: we should not take our foot off the pedal of welfare reform. When people may be finding it more difficult to look for work, they should get more help rather than less. He said that we should be accelerating reforms and bringing them in right now. If I may say so, that is a tiny bit churlish given that yesterday we said that we would be bringing in radical reforms to lone parent support, and given that we are abolishing incapacity benefit and bringing in the employment and support allowance this autumn.
	A programme of reform is already going on. It is significant and radical and the hon. Gentleman has praised it a number of times over the past few months. We welcome and accept his support, but he should recognise the changes that are going on. We are increasing the support we give lone parents but we are also asking them to do more in return. From this April, every lone parent who goes back into work has a £40 in-work credit every week—£60 in London. They have more help in and out of work; there is a discretionary fund that can pay for a new uniform or for child care costs.
	We have radically improved support for lone parents and in return we think it is right to ask them to look for work at a slightly earlier stage. At present, in Sweden, they have to look for work immediately when their parental leave finishes. In Denmark, the age is one, but in the UK it is 16. Clearly, the balance is not right in this country so we shall be reducing the age from 16 to 12, to 10 and then to seven. That is the right approach: giving people more support, but also expecting more of them in return.
	We are doing exactly the same thing with incapacity benefit. Under the Conservative Government, incapacity benefit tripled. Lone parent numbers tripled. The numbers went up from 700,000 to 2.6 million. There was no support for people at all. They were given no help with their health or to get back into work. We introduced pathways to work. We know that the process works and that it gets more people back into work and now we are making it available to everyone across the country. We are replacing IB with the ESA. We will re-test everybody on incapacity benefit to see whether they are on the right benefit and we will expect the vast majority of people on ESA to take up pathways to work and the support we offer. Again, there will be better support, which we know works, and we will be asking and requiring people to take up that support because we know it will change their lives. It will get more people back to health and back into work.
	It is wrong to say that we are not introducing radical welfare reform right now; we are doing exactly that. To pick up the point the hon. Member for Epsom and Ewell made about the AME-DEL transfers—the Ant and Dec of welfare reform policy—we are moving ahead with them as fast as David Freud recommended. The fact that the hon. Gentleman thinks that should be done now shows his complete lack of understanding of how we contract with the private sector. David Freud, whom the hon. Gentleman often quotes, says that we are proceeding at exactly the right rate and that the strategy will be a revolution in the delivery of welfare. I would rather take advice from David Freud than from the hon. Gentleman.
	At the end of the hon. Gentleman's remarks he spoke about the insolvency regime. I am sure the House listened with interest to what he said, but I am afraid I have to tell him that the reforms introduced in the Enterprise Act 2002 have modernised our system, and have meant that it is recognised across the world as one of the very best insolvency regimes. The hon. Gentleman mentioned three things. On automatic sale enforcement, administration already provides for a moratorium for all companies while restructuring is agreed. On priority funding, again administration already provides for priority status over other creditors. The same is true for his proposal on restricting creditor rights to veto restructuring. We have already modernised the regime and we are bringing in further changes next year, yet he tries to pretend that there is a solution to something that the Government have already achieved.

Peter Bone: I am listening with interest to the Secretary of State on this point. I am quite sure that chapter 11 or its equivalent is not in place in the UK at present. Is he really saying that the Government's Act is the same as chapter 11?

James Purnell: It is similar. We have a different approach because we have a different legal system but the hon. Gentleman is welcome to read the Enterprise Act 2002 and raise it with Ministers.
	In conclusion, the thing we should be doing in the House is protecting people in the short term and helping them for the long term. Instead of scoring partisan points and trying to make rather eccentric use of the figures, the hon. Member for Epsom and Ewell should be focusing on what is right for people. We are continuing to help people, as we have done, and in addition we are making sure that people have proper protection for their mortgages—again improving something his Government left undone. We are making sure that the rapid reaction force is available to people around the country. Most of all we are learning those three lessons: not to fiddle the figures, not to consign people to inactive benefits and, still less, not to slacken the pace on welfare reform. I hope that that is the approach he will be taking.

Jennifer Willott: I join the hon. Member for Epsom and Ewell (Chris Grayling) in welcoming the new faces on the Treasury Bench. I also welcome the debate; it is good to be talking about such important issues so soon. When I was looking for an update on the latest figures, I found an estimate produced by the British Chambers of Commerce today that unemployment figures will rise by 350,000 by next year, which shows how important the issue is and how crucial it is that we do something as soon as possible to try to stem the problem.
	The recent rises in unemployment have been widespread across the economy in general, but in the main they can be attributed to people who have been unemployed for less than six months, men, those aged between 25 and 49 and those in the north and the midlands. Specific groups need support and help at this time.
	In a long-term crisis, we can use indicators to measure the severity of the situation. Looking at those indicators today, some of them are particularly worrying for the future. One of them is the increasing length of time that somebody is unemployed. As it becomes harder to find work, people are unemployed for longer. As we are at the beginning of the crisis, that is not happening yet. However, the number of vacancies relative to the number of filled jobs has been falling recently, especially in certain sectors such as construction, finance and business and other services. That is a worrying indication for the future.
	Another indicator relates to average earnings. When times are very tough, earnings grow more slowly as employees' bargaining power is eroded as the job market changes. It is too early to see clear trends, but the latest figures—for June—show that average earnings growth, including bonuses, fell from 4 per cent. at the beginning of the year to 3.4 per cent., which, despite large rises in inflation over the same period, suggests that the bargaining power of employees is beginning to become more limited. That is a worrying sign for the long term.

Ian Davidson: May I seek clarification as to whether the Liberal party agrees that in these circumstances we need a substantial increase in the national minimum wage? What is the figure that the Liberal party would like to see it raised to?

Jennifer Willott: That could be a foolhardy move at this point in time. When a number of businesses are struggling, it could tip some of them over the edge.
	Another issue that I want to raise is the level of economic inactivity. When there is a long-term crisis in the economy, the long-term unemployed eventually stop searching for work and leave the job market altogether. Fortunately, we have not yet reached that point.
	There are worrying signs, but this evening the Government are clearly taking pleasure in the fact that we are not experiencing anything that looks as severe as the situation at the beginning of the last recession in 1992-93, when the Tories were in power. However, I want to flag up a couple of concerns about the Government's record. The Government have wasted a great opportunity. In 1997, when they came in, there were extraordinarily favourable conditions for introducing radical welfare reform. There was sustained growth, and the Government put a huge amount of money into welfare reform, but the reforms have been patchy at best. There are persistently high incapacity benefit claimant counts and persistent levels of poverty.

Paul Rowen: I am sure that my hon. Friend is aware that there is a part of my constituency where three quarters of people are on one form of benefits or another; I know that the Secretary of State is aware of that, because he visited my constituency earlier this year. Does my hon. Friend agree that that illustrates the fact that the Government have patently failed to do anything to get those people back to work?

Jennifer Willott: I share my hon. Friend's concerns. There are areas in the Welsh valleys, very close to my constituency, where there are very high levels of worklessness, which is extremely damaging to entire communities. Despite huge efforts, the Government have not managed sufficiently to reduce persistent poverty levels in the UK. That is one of their failings.
	I want to flag up the issue of rising youth unemployment. Gordon Brown— [Interruption.] Sorry; the Prime Minister said in 1995, when he was shadow Chancellor, that no young person should spend years without a job, and he pledged that no young person would do so under Labour. However, the new deal for young people has not been as successful as the Government hoped. Youth unemployment is higher than in 1997, and it is rising. It is up 172,000 on its lowest point, which was reached back in 2001. Worklessness among the 18-to-24 age group is worsening for every single category, including those who have been unemployed for up to six months, those unemployed for between six and 12 months, those unemployed for more than 12 months and those unemployed for more than 24 months. It is very worrying for the future that so many young people are unemployed. The figures are significantly worse than they were when the new deal for young people was first rolled out. Worryingly, we are talking about an underlying trend; the recent economic turmoil cannot be blamed for the situation, as the figures were similar last year. That trend needs to be tackled.
	The new deal for lone parents, which the Secretary of State mentioned, has been more of a success, although the picture is mixed. Fewer parents with children over the age of 12 have volunteered to participate than was hoped, but it seems to have been reasonably successful; of those who participated whose youngest child was over the age of 12, about half left immediately to go into employment. I am somewhat confused about why the Government are moving lone parents from a programme that appears to be reasonably successful to a sanctions regime under jobseeker's allowance, given that research from the Department for Work and Pensions itself found that lone parents did not respond to sanctions by going into work. They often did not realise why they had been sanctioned, as they were not certain about how much benefit they should have been on in the first place. That is unsurprising, given the rate of error in the benefits and tax credits systems.
	My main concern about the changes that the Government propose, and the impact on unemployment, relates to the economic climate, which we are all discussing. Introducing conditionality for claimants will mean that if they do not get work, they will face sanctions or have to go into workfare. That seems to be a wrong target, particularly with respect to those furthest from the job market—those who are disabled, who have been out of work for a long time, who have very low skills levels, who are lone parents or who have additional caring responsibilities. The job market is becoming increasingly challenging for those who are out of work, and employers are increasingly calling the shots. They can afford to be choosy, and those who are furthest from the job market are most likely really to struggle to get into work. It seems wrong to make them face sanctions. We should not punish those who cannot get into work. Instead, the Government should do more to work with employers, and to tackle the barriers faced by lone parents, those with disabilities and others. They should consider demand as well as supply.
	I take issue with some of the points made by the hon. Member for Epsom and Ewell. Under Conservative Governments in the 1980s, there were more than 3 million people unemployed, a figure that we have not even come close to hitting in recent years. As was highlighted by the Secretary of State, when the figures were looking particularly bad for the previous Conservative Government, rather than tackling the issues, they moved people on to incapacity benefit to get them away from the unemployment figures. That created huge numbers of problems that the current Government are still trying to tackle. It created a hard core of people who have not worked for years, who are out of touch with the job market, and who do not have relevant job skills. It makes it even more difficult for people who are suffering from horrendous physical and mental health problems to enter the job market. The cost to the health service and the economy, and the cost in terms of family breakdown among those who are struggling, has far-reaching consequences for British society, so it is a little rich for Conservative Members to preach to the Government about the problems created by unemployment.

Rob Marris: Does the hon. Lady agree that it is also a little rich for Conservative Front Benchers to criticise the Government for allegedly fiddling the unemployment figures, when, according to my recollection, the previous Conservative Government changed the measure 18 times? This Government have changed it once to bring it into line with international standards and, after that one change, kept it in line with international standards.

Jennifer Willott: Governments are known for changing figures to best suit themselves. No Government are immune from that criticism. As the hon. Member for Epsom and Ewell has said, this year, there is almost no point concerning welfare reform on which the Conservative party has disagreed with the Government. It agrees with the Government on the coercive approach that I have mentioned, and about which I have concerns. That approach is particularly worrying at a time of economic downturn. In fact, the Conservatives have been even harsher than the Government on those who face the greatest barriers to work. They have a three-strikes-and-out policy for those who refuse "reasonable" job offers.
	The motion mentions helping businesses to
	"secure existing jobs and to improve the back to work support available to those who do become unemployed."
	My main concern with the motion is that it does not relate to those people who are already out of work. I am concerned that the motion does nothing to support the millions of people who are currently trying to find work, and who are particularly far from the job market. These are worrying times, and unemployment is rising—nobody disputes that. We do not know how long that will continue, or how bad things will get. I agree with the motion on the point that we need to improve back-to-work support. We need to look much more closely at support that is tailored to individuals. We need to look at what works and replicate it. That would be better than getting rid of programmes such as the new deal for lone parents, which seems to have had some success, and replacing them with much more coercive programmes.
	I agree with everybody in the House on the need to make more imaginative use of voluntary and private-sector organisations when trying to support people back into work. A lot of things could be done to improve the situation, but we need to be realistic about the jobs market. I have concerns about the introduction of too much conditionality and about sanctions, given the current economic climate.

Robert Flello: The hon. Lady talks about conditionality and coercion, but the point is actually the effort that is made. It is not about whether a person succeeds, but about whether they are prepared to put the effort in, and nothing else.

Jennifer Willott: I agree with the hon. Gentleman that we need to encourage people to put more effort into the process. The issue that I was raising was the Conservative party's three-strikes-and-out policy for those who do not accept a "reasonable" job. Who is to decide what a reasonable job is for a particular individual? That takes us into very murky waters.

Paul Rowen: I am grateful to my hon. Friend for giving way a second time. Does she not agree that, rather than dealing with the conditionality element all the time, we should accept that many people, particularly the long-term unemployed, need support in gaining skills to get themselves into jobs? For the sake of employers who wish to employ those people, use must be made of benefits to support training while people are in work. If the Government had adopted a scheme with much more flexibility—I know that they are now talking about that—we might have got some of the long-term unemployed people who want to work back into work a lot sooner.

Jennifer Willott: It is certainly true that the problems that many people faced in trying to find jobs in the past few years arose from skills gaps. In the buoyant job market over the past few years, it is people who did not have the skills who were unable to find work. One of the worrying trends now is that the problem is more likely to be not skills gaps, but the fact that jobs will not be available, however skilled people are. That suggests that there should be a change in emphasis over the next few years.

Paul Rowen: Will my hon. Friend give way?

Jennifer Willott: I would rather finish. When we are considering unemployment and how to support people back into work, it is clearly important for the Government to take into account the current economic climate and to make sure that, as was highlighted by the Secretary of State, they do not make the same mistakes as the previous Conservative Government and make the situation worse. They must not penalise those who are struggling to get work and are doing their best, but who are simply unable to find work because of the economic circumstances.

Mr. Deputy Speaker: Order. Before I call the next speaker, may I inform the House that a 12-minute limit has been placed on Back-Bench speeches? That applies from now on, but the House will see that many Members are seeking to catch my eye, so if hon. Members can take less than their allotted span, that would be extremely helpful not just to me, but to colleagues.

Gerald Kaufman: I marvel that the Conservative party can even stage a debate on unemployment, and I marvel that the hon. Member for Epsom and Ewell (Chris Grayling) felt it possible to talk about the need to protect jobs. The Conservative party, when it was last in office, destroyed indigenous manufacturing industry in Britain: it destroyed the steel industry; it destroyed the motor car industry; it destroyed the shipbuilding industry; and it destroyed the extractive industries. The Conservatives left a wasteland that the present Government had to clear up and then build on.
	In my constituency, we had—I went to see Margaret Thatcher about it when it was in danger, to no avail—an electronics factory that manufactured multi-layer boards. That went under, and it is now a blood transfusion centre. That is one of the legacies of the Conservative party in the Gorton constituency of Manchester. It created a wasteland in which the Gorton constituency was No. 1 in Great Britain for long-term unemployment and No. 1 in England for youth unemployment. We are still above the national average, but the situation in my constituency has been transformed since the Labour Government came to office.
	How has the situation been transformed? One of the first things that the Government did when they came to office was to sign up to the social chapter, which the Conservative party said would be ruinous to the country. When we introduced the new deal, the Tory party voted against it in the House. We financed the start of the new deal by the windfall tax, and both the Tory party and the Liberal Democrats voted against the windfall tax when my right hon. Friend the Prime Minister introduced it.
	The hon. Member for Cardiff, Central (Jenny Willott) has said that it would be dangerous to increase the national minimum wage at this point. In fact, the national minimum wage is being increased at this point. When our Government, when they first came to office, decided to introduce the national minimum wage, the Conservative party, with its spokesman, the right hon. and learned Member for Folkestone and Hythe (Mr. Howard), said that introducing a minimum wage would increase unemployment. In fact, the national minimum wage, rising regularly and periodically as a result of the Government's decisions, has not only reduced unemployment, but given workers a self-respect that they did not have before.
	I had a constituent who, during the period of Conservative Government, came to tell me that his employer—he was a security guard—had increased his working hours from 64 hours to 72 hours alternating, reduced his hourly wage and, what is more, would not pay him overtime. I wrote to the Secretary of State for Employment in the Conservative Government asking her what my constituent could do in those fraught circumstances. She very kindly wrote back to me and said that it was open to him to resign his job. He would, of course, have lost any redundancy benefits, if he had done so. That would not be possible now. Under the social chapter, that man could not be forced to work those hours, and his pay would be protected against the most rapacious employer under the national minimum wage. The present Government have not simply reduced unemployment and increased employment availability to the highest level that this country has ever known, but made it impossible for workers to be treated like serfs, as they were under the Conservative Government.
	The projects continue. Even over the past month, two new projects have opened in my constituency, both as a result of Government policies. We have the new east Manchester construction centre, in which people, who include not only young people but men and women, are being trained in construction skills such as kitchen and bathroom fitting, plastering, carpentry and joining, and general construction operations. The centre is funded largely by the Government through the Northwest Development Agency, the new deal for communities and the learning and skills council.
	The head of Manchester college, which is involved in the project, made a speech at the opening, which I attended, in which he said that before 1997 the only money that his college was given for job creation projects was £1 million to demolish a building. Now it has been given £50 million for employment projects. Those employment projects are not simply reducing unemployment in the Gorton constituency, but giving people skills, so that they can get better jobs and not be ground down and obliged to take the only job available.
	A couple of weeks ago, I attended a graduation ceremony in Gorton monastery, about which I spoke the other day, of people about to be employed in the huge new Tesco that is to open in Gorton later this month. They had an eight-week training period—130 people deliberately and specifically chosen by Tesco in co-operation with Jobcentre Plus, the learning and skills council and Sure Start. I do not know how the Tory party has the nerve to talk about child poverty when it opposed and jeered at Sure Start, which is one of the greatest of a series of projects in my constituency. The Tesco project is exactly what we want in this country today—private enterprise joining with Government and public agencies, including the excellent Manchester city council, in order to provide people with jobs.
	When I attended an address at the graduation ceremony for Tesco, I was moved by the way in which people reacted to the opportunities that they have been given. A middle-aged woman said that she had her self-respect back again. That kind of thing is happening only because we have a Labour Government who are carrying out policies based on not some kind of blanket funding, but a one-to-one project. That is the merit of Jobcentre Plus, the new deal and the kind of projects that I have been talking about.
	Those are not the only projects that are proceeding. The Minister of State, Ministry of Justice, my right hon. Friend the Member for Delyn (Mr. Hanson), came to Gorton a few months ago to deal with bringing offenders back into paid employment, which is again a Government project joining with private agencies. That is the kind of thing that the Government are doing.
	I am proud of this Labour Government. I am well aware that a great deal more needs to be done. In my constituency, we are part of east Manchester regeneration, which would not be possible without the Labour Government and Manchester city council. My right hon. Friend the Prime Minister came to my constituency a couple of weeks ago and opened a £47 million high school that is better than anything in Europe. That was only possible because of Labour Government policies, and, of course, it provided a huge amount of employment for local workers.
	The Government have a record that will stand up against anything that I have experienced in my years in the House of Commons. Yes, there is a lot more to be done, and yes, of course, there is huge concern about how the current global crisis will affect employment. I was interested to listen to the hon. Member for Epsom and Ewell offering a solution to the global crisis—it was a bit different from the solution offered by the shadow Chancellor yesterday, but no doubt when the Leader of the Opposition speaks tomorrow he will offer yet a third solution to the global crisis.
	What we have in this country today is far from perfection, but it is very, very much better than anything that my constituents have experienced since I was a Minister and did such good things for them. I do not criticise the hon. Member for Epsom and Ewell—he has a job to do and he did it quite nicely—but it is just that it was totally incredible.

Roger Gale: The right hon. Member for Manchester, Gorton (Sir Gerald Kaufman) began his speech by marvelling, so let me marvel just a little at his selective memory. In 1982, following the death of Jocelyn Cadbury, I fought the Birmingham, Northfield by-election. There was a 0.02 per cent. swing against the Conservative party, the smallest swing ever recorded, and I lost the seat by 289 votes. We were accused of cutting jobs at the Austin factory in Longbridge. Employment had gone down, I think I am right in saying, from 15,000 to 9,000, and we were told that we had cut those jobs. The choice was not between 15,000 and 9,000, but between 9,000 and none. Under this Government, the automotive industry in Britain has been decimated.
	I happened to take a train through the Northfield site only last week and 98 per cent. of it has been razed to the ground. That is what the Government have done to manufacturing industry, so let us not lay the blame just on the previous Conservative Government. The fact is that the game has changed and the game is changing now.

Robert Flello: Will the hon. Gentleman give way?

Roger Gale: I do not have time.
	On "BBC News" tonight it was said that retail and manufacturing had fallen and the chambers of commerce said clearly that jobs and business were suffering badly in the real economy. I welcome the Under-Secretary of State for Work and Pensions, the hon. Member for Chatham and Aylesford (Jonathan Shaw), to the Dispatch Box. It is good to see a Kentish Member on the Treasury Bench. In a couple of years he will be on the Opposition Benches, or not here at all. As the Fisheries Minister he was courteous to our fishermen, and I am grateful to him for that. I know that in his present role he will be courteous to the unemployed, and I fear that before long there will be more unemployed than there are fish around the Kentish coastline.
	As the Minister knows, Thanet has suffered historically from the highest levels of unemployment and social deprivation in the south-east—among the highest levels in the country. The reasons are not hard to find. Thanet has suffered from an enormous amount of immigration. During the 1980s, the immigration came from around the United Kingdom in what was known as the "dole on sea" syndrome: the unemployed came to the seaside to live on the dole in hotels and guest houses, and Thanet took more than its fair share. That contributed to its unemployed base. The Conservative Government of the time got to grips with that issue, but in 1997 the wave of immigration and asylum seekers began, and that pushed up the figures again. In common with Dover, also on the south coast, Thanet took more than its fair share.
	Throughout the 25-year period, Thanet has also been the dumping ground for cared-for children from London boroughs and, shamefully, from some of the home counties as well. Those young people have grown up. Very many of them have been damaged and found it extremely hard to find employment of any kind, so we are used to unemployment in Thanet. However, the county council and Thanet district council have made a Herculean effort to attract inward investment, to promote skills training and to enhance employment opportunities in general and in Thanet in particular.
	Thanet college is seeking to relocate to provide training in the skills that the sorts of businesses that we want to attract will require. Thanet council has promoted Thanet Earth, probably the most impressive glasshouse horticultural development in the whole of Europe. It is absolutely vast and its hydroponic techniques are staggering. It is highly environmentally sensitive and represents tomorrow's agriculture. It will employ huge numbers of people, and we want those people to be locally employed. However, the other thing that has impacted on us has been the importation of labour—particularly from the new Europe, but also from aspirant countries on the fringe of Europe.
	Yes, agriculture does need imported labour; on that we take issue with current Government policy because, as the Minister knows, agriculture in Kent relies heavily on casual student labour for the picking of fruit. Historically, the hop pickers from east London did the job, but now students come from all over Europe to pick our top fruit and soft fruit—and we need them. However, we also need jobs for local people. The recovery in east Kent has been extremely fragile and what we are seeing now, in the current economic climate, is the shattering of that recovery. It is no good those on the Government Benches saying that we Conservatives are talking the economy down—the economy is down. We are in recession. If the Government choose to be in denial, so be it, but we know that out there in the real economy businesses are closing, shops are closing and people are losing jobs.
	You, Mr. Deputy Speaker, wanted me to be brief, and I will be. I want to make two specific pleas to the Minister and two observations to my hon. Friend the Member for Rutland and Melton (Alan Duncan) on the Conservative Front Bench. I understand that there is a proposal to close the jobcentre in Whitstable, which is represented by my hon. Friend the Member for Canterbury (Mr. Brazier). I am concerned about that because the unemployed people involved—there are 220 at the moment, and the figure is rising daily—would have to come to the Herne Bay jobcentre in my constituency for the assistance that they need. On my estimate, were the closure to happen, there would be 500 extra journeys a month, which I do not consider to be environmentally friendly. It would also impact on staff and the services available to my constituents who use the Herne Bay centre.
	I mention the issue not because I believe that the area jobcentre manager is not doing her job well; I am sure that she is—she is trying to maximise her resources. I mention it because I do not believe that now, as we go into a recession with unemployment rising daily, is the moment when this or any other Government should close jobcentres. Those centres will be needed more and more for the foreseeable future. I understand from other colleagues that similar proposals are being made around the country. I mention this now because I believe that the Minister needs to address it immediately in his new role. The game has changed; the economy has changed. Plans that were being laid nine months ago are no longer relevant. We have to look at the situation again.
	Another issue that I wish to raise has a direct impact not on today's employment but on tomorrow's employment and the circumstances that we hope to face when, as we will, we come out of this recession—empty property rates. My political colleague who represents the Conservative interest in South Thanet, Mrs. Laura Sandys, has blazed a trail in east Kent on this issue, working with the chambers of commerce. I freely concede that she was ahead of me, but she has been ahead of many Members on both sides of the House, in recognising the damage that is being done by Government legislation that imposes full business rates on empty properties after six months. House building has virtually come to a grinding halt, with all the jobs that have gone with that. The same applies to the building of industrial properties. The right hon. Member for Manchester, Gorton talked about investment in new industrial premises and said that under a previous Government money was offered to pull those premises down. Premises are being pulled down as I speak so that the owners of those empty properties do not have to pay business rates. If we continue down this road, when we come out of recession we will not have the properties or premises that we need. That must be changed, and Ministers have the power to act under existing legislation at the stroke of a pen. This legislation was designed, or dreamed up, for circumstances that existed three years ago but do not exist today. We must change it today, because tomorrow will be too late—it is already too late for buildings in the Medway towns that have already been demolished.
	My final point concerns the impact that the current economic climate is having on the elderly. When we think about unemployment, we tend to think of young people; indeed, there are far too many unemployed young people. However, today I took a call from an elderly, dignified lady whose husband is too frightened to retire, although he is well over retirement age. After a long and successful working life, that man, fearing for his savings, his bank balance, his pension funds and his modest investments, is stacking tins in a supermarket at night to ensure that his wife does not go hungry. That is the reality of the economic situation that our constituents face.

Nigel Griffiths: The Conservatives are not brave about many things, but they are certainly brave in tabling today's motion on unemployment in the United Kingdom. They are surely the experts on unemployment, for they gave unemployment to every region, every community and every sector. In Edinburgh, South, their political heartlessness combined with their economic incompetence to leave a legacy of more than 2,000 people on the dole in 1997. That is the golden legacy that they hark back to. Now, in the seat of Edinburgh, South, within large boundaries, unemployment stands at 667—it has fallen by more than two thirds. That means that 1,372 fewer people are now worried about applying for jobs, seeking employment and where they will get the money that they need for themselves and their children.
	In the past year alone, unemployment has fallen by 8.3 per cent. and more than 333,000 people have entered work. That has given the UK an all-time record employment figure of 29.5 million. Of course, none of this happened by chance—it happened by choice when the Government chose to levy £5 billion as a windfall tax on the excessive profits of the utilities to fund the new deal. Instead of 3 million languishing on the dole, unemployment recently fell to its lowest level since 1975. Our choice was to bring long-term unemployment to its lowest for 30 years. The Tory choice would have been no windfall tax, no new deal and not even a minimum wage to stop exploitative employers. But then, as the shadow Chancellor made clear on 17 September,
	"making...money out of the misery of others...is a function of capitalist markets."

Alan Duncan: He never said that.

Nigel Griffiths: He certainly did say that.
	Those are their values, not ours. It was their choice, not ours. It was their 3 million on the dole. Our choice was to help to create 3 million more jobs than there were in 1997, putting more people in work than at any time in our history. It was this Government's choice to give the UK one of the highest employment rates of any advanced manufacturing country—it is higher today than that of France, Italy, Germany, Japan or even the United States of America. So far this year, every weekday, 10,000 new vacancies have been posted. With 600,000 vacancies, 90 per cent. of those losing their jobs and seeking another one find work within a year, while 80 per cent. find one within six months.
	This motion was tabled by the party that regrets rien and labels as unemployed parents with very young children, the most severely disabled people, carers of disabled children and frail elderly people and the bereaved. Doubtless, the Opposition think that they should pick up their spirits and get on their bikes. Those are the very people—the disabled and others—that the Opposition pretended to care about in their welfare reform proposals of 27 May, when the hon. Member for Epsom and Ewell (Chris Grayling) claimed that they would be exempt. But now, just four months later, here in the House, the Opposition have counted them in, as we knew they always would.
	The task of Government is to tap into the talents of every citizen. That is what the record number of university and college places is about, and it is why we have more than tripled the numbers of apprenticeships. Let us remember that other Tory legacy: 75,000 apprenticeships in 1996-97. Now there are 255,000, with 70,000 alone in manufacturing. But it does not stop there. This Government are committed to ensuring that every 17 and 18-year-old has an apprenticeship, a college education or skilled schooling to allow them to maximise their potential. And it does not stop at that either. We are committed to the £1 billion Train to Gain programme, which will allow businesses to invest in the training and retraining of their work force to meet the skills challenges all businesses face.
	There must be no return to the mass unemployment, despair and poverty that ravaged many communities in the 1980s and 1990s. For this country to ride out these economic storms, and for us to prosper in the decades to come, we must tap into the talents of every person in every part of this country. As a nation, we cannot afford to neglect the talents of anyone, regardless of race, creed, ability or disability. That is the path we must choose.

Douglas Carswell: I will be as brief as I can. I am very concerned about unemployment, especially in Harwich and Clacton in my constituency. In August, male unemployment stood at about 6 per cent. and it is rising. Even before the full impact of the debt-fuelled recession is felt, unemployment in my constituency is high. I am concerned about unemployment and its grim consequences for my constituents.
	Like many seaside towns, Clacton, Walton-on-the-Naze and Harwich have all suffered economically in recent years, and we have yet to see much of a vision on how to regenerate such resorts. Unemployment nationally is rising by something like 1,000 a day, and many of those folks are my constituents. Indeed, unemployment in Clacton could be increased by 50 in the next few weeks, by the Government's decision to close the Revenue and Customs office. The raw data on unemployment hide other facts that should concern us. Almost one in five people of working age are classed as economically inactive. Despite all the Government's boastful claims, the rate of economic activity today is virtually unchanged from what it was a decade ago.
	I am concerned that many of those who are not formally regarded as unemployed are being let down. They are not being helped back into work and, with a looming debt-created recession, they will find it even harder. I am especially concerned about long-term youth unemployment in Clacton. Far too many young folk in Clacton are not in employment, education or training and, to be frank, the new deal does not really do much for them. Rather than recognising the problem, the Government are, I fear, just cooking the statistics. Young people claiming jobseeker's allowance for six months, for example, are automatically referred on to the new deal. If they fail to get a job on the new deal, they can be moved off jobseeker's allowance, on to the so-called training allowance. They disappear from the official statistics, but believe me, they do not go away—they are there in Clacton. I want to know what the Government will do to help.
	I am concerned about how rising unemployment will affect those on incapacity benefit. Some 2.6 million people are claiming incapacity benefit, which is three times more than the number on jobseeker's allowance. I fear that incapacity benefit could end up being used as a way of trying to force unemployed people off jobseeker's allowance—indeed, some say that that is already the case—which could make it much tougher for those who genuinely need incapacity benefit to receive it. If incapacity benefit becomes a substitute system of jobseeker's allowance, that will not help anyone.
	Finally, some eight out of 10 jobs created have gone to immigrant workers. I have always strongly disapproved of the phrase "British jobs for British workers". It is a phrase that the Prime Minister used, which was extremely ill judged. The phrase had some unsavoury tones of economic nationalism and, as a free-market liberal, I found it offensive. The phrase is one that I would have expected to hear in the 1930s, not in Britain today. However, the new jobs created have disproportionately tended to go to people who were not born in the UK. I suspect that that is a fairly damning verdict on the Government's education policy. They have simply failed to ensure that we have an education system that delivers the level of skills needed.
	The Government have had a decade of extraordinary growth. The sun has shone. However, they have failed to reform welfare to help people into work. They have failed to listen even to voices on their side, such as that of the right hon. Member for Birkenhead (Mr. Field), and to implement some of the proposals that he has made over the years. The Government have failed to produce an education system capable of providing people with the necessary skills to take the jobs that are available. With the Government having failed while the sun was shining, to coin a phrase, we now face a serious problem of unemployment, as the economy goes from boom into bust.
	The tone of Labour Members in this debate has all too often been one of indignant outrage that the Conservative party should dare even to talk about unemployment. Their indignant outrage is matched only by their references to the past—to history. That shows that after a decade of being in government, Labour Members are out of touch. The rising tide of unemployment that we now face has increased and will increase on their watch.

Jim Devine: I once had the great privilege of working for a very clever psychiatrist, who told me never to listen to what anybody says, but always to watch behaviour. I want to deal with the behaviour of the Conservatives when they were in power.
	Like other hon. Members, I congratulate the Conservatives on having the audacity to call a debate on unemployment, particularly this week, which has seen the anniversary, on 5 October, of the Jarrow march, when 200 men walked from Jarrow for 22 days. They collected 12,000 signatures to a petition, which was unprecedented, to campaign about unemployment. The anniversary was this week.
	I want to talk about my personal experiences of unemployment from when the Conservative party was in power. I am a 55-year-old—I know that I look a lot younger—and I had friends who left school in the late '60s and early '70s. I had not one friend who left school who did not have a job. People left at 15 and went into labouring. Others left at 16 and went into apprenticeships. People such as myself left at 17 or 18 and went into further education. I remember this as a rite of passage. We left school and were part of society. We felt that we had status and standing, and we received a pay packet or a loan. There was something very special about it. It was our contribution to society, and it was about saying that we had a role in society.
	In fairness to the Conservatives, every Government, Tory or Labour, since the late '20s and early '30s have been committed to full employment. As Harold Wilson once said, the Labour party is a campaign against poverty, or it is nothing. Tory MPs from Macmillan through to Ted Heath were committed to full employment, but that changed under the premiership of Margaret Thatcher. It is naive for the Conservatives to pretend that they have changed, because many of them are still part of the No Turning Back group. They still believe in the basic Thatcherite philosophies that we had to suffer in the working class communities in the late '70s and early '80s. We had a Thatcherite Government who were prepared to indulge in a financial experiment that had an impact on individuals, their families and their communities.
	Unemployment in parts of my constituency rose to 26 per cent. all the way through that time. I have seen the lump in operation—it was something that my granddad had told me about. For those who do not know, when the Tories were in power, men—there could be up to 25 of them—had to assemble at a pre-determined place and a builder would come along and pick five of them. He would take them away to a building site for a day, without any training, health and safety or access to a trade union. At the end of the 12-hour day, he would put £10 in their hands. This is what happened. Those unemployed men then had to go through exactly the same process the following day. It was demeaning and humiliating, and it was meant to be.
	The film "The Full Monty" brilliantly characterised what was happening in working class communities at the time. The leading character, played by Robert Carlyle, was a man who had to steal lead so that he could take his child to the football on a Saturday. Then there was the manager who left his house every single day at the same time, dressed for work and carrying his briefcase, because he was too ashamed to tell his wife that he had been made redundant. A third character was a man who could not perform in the bedroom because the Tories were not allowing him to perform in the workplace. His dignity and his status had been taken away from him. The fourth senior character in the film was a man who tried to kill himself, because that was the logic of Thatcher's view that "there is no alternative". He took that logic to its natural conclusion. If that was what life was like on the dole, with no status, no standing and no ability to provide for his family, he did not want anything to do with it.
	I worked as part of a primary care psychiatric team in my constituency. I watched patients coming to the health centre and being prescribed anti-depressants and Valium. If they had been prescribed a job, they would not have had to go anywhere near that health centre.

Peter Bone: I am very interested in the hon. Gentleman's powerful speech, but I would like to bring us back to the 21st century. Is he not at all concerned that unemployment in his constituency has gone up by 8 per cent. over the past year?

Jim Devine: I will deal with the current unemployment levels in my constituency at the end of my contribution.
	Working as part of the primary care psychiatric team, I used to make appointments at 9 o'clock in the morning for such individuals. The reason was that the appointment was the only thing that they had to get up for—the only thing to get dressed and washed for, and to get out of their beds for. There was an appalling impact on the community in which I was born and brought up. We saw the destruction of individuals and their families and the break-up of marriages. That was the reality in such communities, and in the community that I represent.

David Anderson: Does my hon. Friend agree that the real difference between then and now—it is right to look back—is that what happened in his constituency, as in mine, was the direct result of Government policy, whereas what is happening today is outside the Government's control?

Jim Devine: I was about to come to that point.
	We should remember this financial experiment and its consequences. We were told that mass unemployment was an accident of central policy. But mass unemployment was the central part of the strategy of that policy. We know that because we can remember Tory Ministers saying at the time, "High unemployment is a price worth paying," and, "If it isn't hurting, it isn't working." In my constituency, it certainly hurt. I find the Conservative party's crocodile tears about the unemployed hard to take. I believe in what my psychiatrist told me: "Never listen to what somebody tells you. Watch behaviour." When the Conservatives were in power, their behaviour destroyed my community and many others like it.
	On the question asked by the hon. Member for Wellingborough (Mr. Bone), I am delighted to tell the House that unemployment in my constituency today is at 2.4 per cent. That is down from 20 per cent., and 26 per cent. in parts. It is no accident that unemployment is down to that level. It is the result of the Labour Government's calculated strategy, to which reference has been made. I am a socialist, passionate about the Labour Government, and very proud of them. The aim and objective to create full employment, as we said 11 years ago, has been achieved. Yes, we have difficulties, which, in the main, are outwith our control. But we should ensure that the Conservatives never get their hands on the levers of power again, because we remember exactly what they did.

Stephen Crabb: It is a pleasure to follow the hon. Member for Livingston (Mr. Devine), whose contribution was impassioned and at times entertaining. I must take issue, however, with his claim that those on the Government Benches have a monopoly of concern and interest in unemployment. We would take that claim more seriously were any of them willing to engage with the current circumstances.
	I congratulate those on my Front Bench on securing this debate at a time when the international economy and financial system is undergoing a trauma that none of us has seen before in our lifetimes. As someone described it to me last night, the pieces have been thrown up in the air, and we do not know whether they will fall down in the same place—they will probably not—and how they will fall down. We do know, however, that real economic pain is starting to be felt.
	I think that the hon. Member for Livingston—forgive me if it was not him—called out "Rubbish" when my hon. Friend the Member for North Thanet (Mr. Gale) talked about some of the economic difficulties being felt in his constituency. However, that is the reality. If we talk to any of the major recruitment agencies—perhaps some Government Members will have the opportunity to do so in the next 18 months—they will tell us that there is a freezing-up of recruitment in certain important sectors in our economy. This is not just a banking and financial crisis. The real economy is starting to slow down, and a real economic chill is starting to set in.
	I want to focus on an issue that has been mentioned in passing by several hon. Members—youth unemployment, in which I take a close interest. Ministers have claimed repeatedly at different times in recent years that long-term youth unemployment has been virtually eradicated or wiped out. Unfortunately, the statistics simply do not back that up. Those who do not believe the statistics should go down to any town centre in the middle of a working day. In most constituencies, they will see large numbers of young people doing nothing with their lives.
	My hon. Friend the Member for Harwich (Mr. Carswell) hit the nail on the head when he said that although we had experienced 10 years of good times—or relatively good times—involving sustained economic growth, the operation of a flexible labour market and the falling of the headline unemployment rate, during those good times there had been no success in tackling the hard core of youth unemployment. In fact, it has become worse. That represents a major stain on the reputation of the Government who were elected in 1997. I seem to remember from their election campaign that one of their five key pledges was to bring down youth unemployment, but what has actually happened is that youth unemployment has increased.
	In 1997, the Prime Minister—with, no doubt, his famous moral compass buzzing—described youth unemployment as a "human tragedy", as "sickening" and as "an economic disaster". Those are the terms on which we should hold the Government to account. At the time, the Prime Minister asked
	"How did a society like ours get itself into a position where we are wasting young people's talents like this?"
	We can ask exactly the same question here in 2008. The Prime Minister said at the time that
	"staying at home is not an option",
	and that it would not be an option. Well, it is, actually, for too many young people; for 1.2 million young people, staying home or hanging out on the streets is an option.
	That is the scandal of youth unemployment that is on the Government's charge sheet. At a time of sustained economic growth with, as near as dammit, full employment in many parts of the country, when the cohort of 16 to 24-year-olds is shrinking slightly as a proportion of the overall population, why should there be a 70,000 increase in the number of people of that age who are not in education, employment or training? My constituency is in Wales, and in Wales the position is even worse. Nearly 20 per cent. of 19 to 24-year-olds are doing nothing constructive with their lives. Research commissioned by the Prince's Trust suggests that youth unemployment is costing the country £3.6 billion a year.
	What has let the Government off the hook over the past 10 years is the fact that we have benefited from a large influx of migrant workers. I for one do not consider it a negative development that people have come into our country with skills, drive and entrepreneurial initiative—it is a good thing that they have come into this country—but it has let the Government off the hook. They have not seriously had to tackle the long-term problem of youth unemployment.. The fact that 1.2 million young people are not in work has not caused severe economic problems, because the gaps in the labour market have been filled by migrant workers.
	Reference was made earlier to the role of Jobcentre Plus offices. I for one have spent significant amounts of time with my two local offices. I have huge admiration for the staff, who are trying to do an excellent job, but they are very clear about what they can and cannot do—about what they are cut out to do and what they are not cut out to do. During my discussions with them, they have made clear that they are simply not in a position to address the multiple and complex needs of many newly unemployed young people who do not have the basic life skills and basic literacy to perform even very basic jobs in the modern labour market.
	During the summer recess, I spent some time with my local Prince's Trust organisation. It has a fantastic training centre at Pembroke Dock. Although it is in the neighbouring constituency of Carmarthen, West and South Pembrokeshire, a significant part of the client base comes from my constituency. I participated in CV-writing workshops, and in all sorts of other activities. That is an example of a third sector organisation that is trying hard to rescue a lost generation of young people and give them back some self-esteem and direction in their lives, or at least to return them to the lowest rungs of the ladder, which will hopefully lead to sustained employment in due course.
	I make the following appeal to the Government. At a time when businesses are starting to suffer, we should also remember that the charitable sector is starting to suffer as a direct result of the economic downturn, and there are organisations such as the Prince's Trust and Fairbridge that provide strategic work in this area. A recent survey—it was published today, I think—by the Association of Chief Executives of Voluntary Organisations pointed out that there has been a 72 per cent. increase in demand for charities' services, that 88 per cent. of chief executives of charities expect their income to fall as individual and corporate donations decrease, and that 30 per cent. of charities say they have been forced to make redundancies. I know the Government recognise the role the voluntary or third sector plays in working in conjunction with the private and public sectors to tackle long-term—and in particular youth—unemployment, and I appeal to them to recognise the particular pressures it might be facing at this time.

Albert Owen: It is a privilege to follow the hon. Member for Preseli Pembrokeshire (Mr. Crabb) because I do not accept that there is the doom and gloom he talks about in Wales, but I do remember recent history when there was real doom and gloom in my constituency. For the record, benefit claims have dropped by, I think, about 70 per cent. in the hon. Gentleman's constituency. That is a success in the last 10 years that he failed to mention.

Stephen Crabb: No one is questioning the headline unemployment figures; there is no point in trying to score points on that. The point I was trying to make is that, underlying those headline figures, are deeply entrenched problems around long-term and, in particular youth, unemployment. That the hon. Gentleman responds by simply referring to the headline figures shows that he has not been listening and that he understands nothing about the problem we are discussing.

Albert Owen: With respect, before being elected to the House, I was a manager in a centre for the unemployed in Anglesey, and I dealt very much at the front line with youth employment—and with many issues such as lone parents. The centre I managed offered advice, training and support for the unwaged, so I think I do have a bit of experience in this field, and I wish to develop an argument that will defend what I have to say.
	The centre was established in an area of very high unemployment in the 1980s, or re-established I should say, because the centre for the unemployed was originally established in the 1930s, and the sad fact is that unemployment in the 1980s under the Conservative Government mirrored that of the inter-war years of the 1930s, when we had mass male unemployment. In the 1980s, we had male unemployment in my constituency—I hope the hon. Member for Preseli Pembrokeshire is listening now—of 25 per cent. A quarter of the male population was unemployed.

David Davies: rose—

Albert Owen: I will not give way at present, as the hon. Gentleman has just come in and we are nearing the end of our debate.
	The Conservative legacy in my constituency was threefold: mass redundancies, mass unemployment and mass depopulation. My constituency of Ynys Môn or Anglesey was the only county in England and Wales that in two successive censuses—those of the '80s and '90s—saw a decline in its population. That decline was caused by high unemployment, when young people and their families had to leave the area to find employment elsewhere. That is the legacy of the Tory years of the '80s and '90s.
	So let me give the answer to the question about what the Conservatives did for Anglesey or Ynys Môn: they gave us two decades of mass unemployment, decline and stagnation, and two recessions—deep recessions that bit very hard and hurt the people I was helping out in my previous job. My hon. Friend the Member for Livingston (Mr. Devine) mentioned the famous, or infamous, comment by Lord Lamont—and we know who was advising him at the time—that unemployment was a price worth paying. My constituents, young and old, actually paid that price over the two decades of the '80s and '90s.
	The story of the last 10 years is rather different. Unemployment—both headline and real—is down considerably. Employment levels are up by some 7 per cent. One of the highest increases in Wales is in my constituency, where we have seen a 29 per cent. increase in employment levels. That is the real story of Wales today under this Labour Government, compared with Wales in the '80s and '90s under the Conservative Government.
	That did not happen by chance. The new deal for the unemployed was a policy, paid for, as has been said, by a windfall tax on the utilities. I am rather fond of windfall taxes, and I have tried to encourage the Chancellor of the Exchequer to go down that road again to help to tackle some of the root causes of hard-core unemployment that the hon. Member for Preseli Pembrokeshire discussed. This Government invested in helping the unemployed back to work through that scheme and others. Labour Members rightly believed that unemployment was not a price worth paying—it was a problem worth sorting. During the past 10 years, we have done our best to sort that problem out.
	Labour also introduced the minimum wage, and, again, that did not happen by accident. The policy was opposed by the Opposition. I hear today that the hon. Member for Cardiff, Central (Jenny Willott), who speaks from the Front Bench, is not happy that we are raising the level of the minimum wage; I am not sure whether that is Liberal policy. I recall that when the minimum wage was introduced in my constituency, the wages of hundreds of families doubled from £1.80 an hour to £3.60 an hour, giving dignity to families young and old.
	By August, unemployment in my constituency had fallen to 4.2 per cent.; it had reduced by 53 per cent. Too many people remain unemployed, but Ynys Môn is not now top of the Welsh league of unemployment; it is halfway down that table, and the levels are well below those of the 1980s. There are black spots of unemployment in my constituency, which is why I intervened on the Secretary of State about the proposal by the Department for Work and Pensions to close a job centre in one of those black spots. It is located in a rural area where it is difficult for people to get to other job centres, as they will be required to do. I understand the back-up provided by the internet and various other things at the contact centre, but that contact centre will be moved. I am glad that he has agreed to meet me, because it is the wrong time to close job centres when unemployment is undisputedly rising. I hope that the closure of the centre at Amlwch in my constituency will not go ahead and that people will be able to get the face-to-face contact that they deserve.
	This economic downturn has been caused by a number of factors: the world credit crunch; the global financial crisis, which we have debated today, and high fuel prices and energy costs. They are having an impact on businesses in my constituency and across Wales and the United Kingdom. A cut in jobs is inevitable, but I believe that the UK is better placed than it was in the 1980s and 1990s, when two deep recessions had an impact on constituents across the UK.
	The largest employers in my constituency include an aluminium smelter works and Stena Line at the port of Holyhead, both of which face major challenges from the high increases in fuel prices, as do other companies. All energy intensive users across the UK, from paper mills to brick and cement works and aluminium smelters, face similar problems. I declare an interest, because I chair the all-party group on the aluminium industry. Electricity prices are too high in the UK, they make British manufacturing less competitive and they could lead to big job losses. According to  The Times yesterday, the price of electricity in the UK is four times higher than in France.

David Davies: One of the reasons for that is the cost of the renewables obligation commitments, which is being put back on to the customer. The rate of unemployment looks so low because many people are on sickness benefits, and the reason why so many people have extra jobs is because they came here from abroad.

Albert Owen: The hon. Gentleman has just come into the Chamber and has not listened to both sides of the debate or even to the debate about the financial situation. One of the reasons why electricity costs four times more in the UK than in France, and costs more than in Germany, is the lack of capacity. That lack is exacerbated by the fact that we have not built enough nuclear power stations over the past 20 years. Some 80 per cent. of France's electricity comes from secure sources of electricity—nuclear power—and France is able to keep its price low.
	Rather than gibber about various issues that have arisen in the debate, I have raised a specific point that I would like the Government to address. I am pleased with their record and what they have said on new nuclear build. Indeed, I have campaigned for new nuclear build in my constituency, but I have been very disappointed by the Conservative party. It is dithering on nuclear power stations, trying to use the policy as a last resort, when we all know that it takes a decade for them to go through the planning system and be built. I am prepared to take an intervention from a Tory Front Bencher on that point—[ Interruption.] Well, I would "Get with it" if I knew what the Conservative policy was. As I say, I will take an intervention from the hon. Member for Rutland and Melton (Alan Duncan)—[ Interruption.] He says that I am out of date, but I am not sure what has changed since their conference last week.

David Taylor: The hon. Member for Monmouth (David T.C. Davies) echoed a remark by the hon. Member for Harwich (Mr. Carswell), and they both displayed a breathtaking chutzpah in suggesting that unemployment figures are being massaged by the decanting of claimants on to incapacity benefit. The Thatcher Government created invalidity benefit and saw a huge surge in the number of claimants. The number has floated up slightly over the last 11 years, but the huge growth occurred much earlier.

Albert Owen: I am grateful to my hon. Friend who has been in and out of the debate, unlike the hon. Member for Monmouth (David T.C. Davies) who has just come in. That point has been addressed by many Labour Members, because the Thatcher Government not only massaged the figures, but they did so 18 times to mask unemployment levels. They put people on to long-term sickness benefit, contributing to long-term unemployment in many areas.
	The other big employer in my constituency is transport, including the port of Holyhead, and fuel prices are having an impact not only on road hauliers, but on the ferry companies that use a lot of fuel to get people and goods across the Irish sea. I hope that the Government will take that on board. I welcome the fact that the Chancellor decided against the duty increase this autumn, because that will help the road hauliers, but more has to be done to help intensive fuel users such as fast ferry companies. They transport people and goods to help the economy to keep moving at full speed.
	I have raised challenging issues for my constituency and they need to be addressed. The Government are not running away from their obligations, but it is right for Labour Members to remind people of recent history. The hon. Member for Harwich (Mr. Carswell) is not in his place at the moment, but I know that the Conservatives would like to forget recent history and their record on employment and unemployment. We need to secure existing jobs and provide opportunities and hope for the long-term unemployed. That is why it is worth investing in skills for our young people and in re-skilling older people.
	We must help those who are still on long-term unemployment or sickness benefit to get back to work. I have said on many occasions that I want to see a carrot-and-stick approach to that, but I want the carrot to be bigger than the stick. We should help and encourage the long-term unemployed back to work.
	The Government were right in 1997 to tackle mass unemployment and to put that at the top of their agenda. They were right to introduce the new deal, which has been a success in my constituency and many others in Wales, including Preseli Pembrokeshire, which has seen one of the largest falls in unemployment of the past 10 years under this Labour Government. They are also right to invest in people and communities. Getting people off unemployment benefit is a price worth paying. The immediate prospect of global and financial turmoil will be challenging, but we must remain focused on the need to modify and reform the welfare state by giving support and hope to our people, instead of returning to the bad old days of mass unemployment in the 1980s, which still scar my constituency and many others across the UK. We must move forward, not back to those days.

Peter Bone: It is a great pleasure to follow the hon. Member for Ynys Môn (Albert Owen). Although I did not agree with everything he said, I certainly agreed with him on the subject of the closure of jobcentres. It seems to be a strange time to be closing jobcentres when it looks as though there will unfortunately be a lot more unemployment. I noted that unemployment in Ynys Môn increased by 7.8 per cent. last year, so the trend is going up. I also want to refer Members to my entry in the Register of Members' Interests.
	I thought that the debate was generally most interesting and that it tried to be constructive where possible. The most important issue to come out of the debate was the fact that the shadow Secretary of State pledged the Conservative party to a chapter 11 proposal, but I do not think that the Secretary of State understood the situation. Chapter 11 gives companies the time to reconstruct, to go to court, to get the whole thing on a level playing field, to get their business in order and to continue to trade. That does not happen in this country when companies go into administration. As my hon. Friend the Member for Epsom and Ewell (Chris Grayling) said, the banks come along and close the company down, and there is no method to save that company. That, of course, leads to increased unemployment.
	I thought that those on the Government Front Bench were very complacent about the situation. We clearly have a boom-and-bust situation. I know that the Prime Minister kept saying that that would never happen, but if we are not careful, we will have the worst bust for more than 100 years. Unless a Government recognise a problem, they will never put it right. Now I have said that, I hope that I can be more constructive in my comments.
	I have heard time and again how the wicked Tories left the country in a terrible mess last century, in 1997, how everything was evil and how it was terrible for people, so I thought that I had better look up the unemployment figures for Wellingborough in August 1997. Unemployment then was at 1,678. That must have been terrible, because we have heard time and again that it was the pits and that the whole world was going down at that time. Unfortunately, unemployment in Wellingborough today is at 1,710, an increase since 1997. Instead of there being a wonderful economic miracle up until now, the economy in Wellingborough has gone backwards. If it has gone backwards when there have been good times, what on earth will happen during the bad times that are just around the corner?
	Let me make a point on a serious note, which I hope will worry the whole House. We have in Wellingborough a good multicultural society. We have people from all races in the town and we have had for a long time. I run a "Listening to Wellingborough and Rushden" survey, which tracks people's concerns. Until a few months ago, immigration never appeared in that survey as a problem. It is now coming out as the first or second issue. I could not understand how that could have changed, but it is actually to do with unemployment. If we look behind the headline subject of immigration as the No. 1 issue, unemployment is the problem.
	Let me give an example. A new supermarket opened in the town and needed to take people on. Let us imagine that we were the manager of that store. A Polish worker might come along, smartly dressed, and say, "I used to work in a store in Poland. Please give me as much overtime as possible. I don't mind working nights; please give me as much work as possible." On the other hand, someone from the jobcentre might first ask, "How much holiday will I have?" and say, "I can't possibly work weekends." It would not be unreasonable as store manager to give the job to the Polish worker. The problem is that the person from the jobcentre, who is British, would get offended. It takes only a few evil people from the British National party to come along and exploit that situation.
	We never had any problem with the BNP until a few months ago. A BNP candidate stood in a safe Conservative ward, which we won quite securely. However, the Labour party, the traditional party that came second, was pushed into third place. So we have gone from being a town that did not have a problem to being one that does. I am sure that that problem is being repeated across the country. I do not know the solution, but it is a real problem. Unemployment is going up, while migrant workers are coming in, and the BNP says that they are stealing British jobs. That is not true, but that is what the BNP makes out, and the worse the recession and unemployment become, the greater is the danger that those evil extremists will come into our society. I hope that we can work together to address that problem.
	A particular additional problem in Wellingborough is that we are part of a growth area. The existence of lots of new houses and new migrant workers means that people can see the change that is taking place, and I have to tell the Minister and other colleagues that we must look at the problem. We must not be scared to address it, as we must find some solution to it.

Ian Davidson: In the first 10 years of this Labour Government, unemployment in my constituency came down by 50 per cent., youth unemployment came down by 80 per cent. and long-term unemployment came down by 90 per cent. Those are statistics of which the Government and I can be proud, and they represent one of the best things that this Government have done.
	However, we have to recognise that the economy is on the turn. Male unemployment in my constituency has gone up to 10 per cent. We clearly face a problem with the hard-core unemployed, and I very much regret that we missed an excellent opportunity when the economy was booming to move many of those people into employment. We should have allowed the market to pull them into jobs, but instead we acquiesced in a policy of unlimited immigration.
	The colleague who has just spoken, the hon. Member for Wellingborough (Mr. Bone), was undoubtedly right to say that many of the jobs that the market would have filled with people who were otherwise difficult to employ have been filled instead by eastern European migrants. As he said, an employer might have to choose between a person from eastern Europe who is highly skilled, motivated and educated and someone who has not worked for 10 years, who has a problem with drink or drugs or who has difficulties with attendance. Who will that employer select? The answer is a no-brainer. In my constituency, vacancies were not made available to people who would have benefited very much—given the right supervision and support—from those opportunities.
	None the less, we have to recognise that what the Government are proposing is absolutely necessary. In the main, the proposals are excellent but, for constituencies such as mine, they are not sufficient. There are three areas in which I think that the Government must take some action.
	The first relates to what I said in an earlier intervention on the Secretary of State, when I spoke about the old community programme. The private sector and the normal routes to employment are not going to cope with the hard-to-place individuals to whom I have referred. If we are going to get them into the habit of work and attendance, so that they experience the pride that comes from making a contribution, we will have to create an agency similar to the old community programme. Perhaps it could be called the new community programme, but we need something that will allow the voluntary sector or local government to offer such people employment opportunities. In the present competitive environment, it would be unfair to expect the private sector to carry people who undoubtedly will be less productive than other workers in the same circumstances. Something needs to be done in that regard. Although much is already being done, it is not sufficient.
	The second issue that we need to address is how the benefits system interacts with getting people into work. People are not always convinced that they will be better off in employment. I believe in incentives in those circumstances. It is not clear to me or to people in my constituency that they are genuinely always better off in work. The complexity of the benefits system cannot be explained to people who have some difficulty with literacy or numeracy; indeed, it cannot be explained to many people who have no difficulty with literacy or numeracy. It is unclear whether people will be better off.
	There is a loss of benefits for many people who get employment. They lose council tax and rent benefits, and they lose in a number of other ways. That interaction means either that people are being invited to go into employment for almost nothing or that, as shown by the evidence given to me by local citizens advice and information centres, they are actually worse off. In those circumstances, it is entirely comprehensible and rational on economic grounds that people do not seek employment. That is why we need to decomplexify, if such a word exists—

Rob Marris: Simplify.

Ian Davidson: That is a much better way of putting it. I thank my colleague for that intervention.
	We need to simplify the benefits system, but we must provide greater incentives. If people believe that incentives of a financial nature are necessary for the masters of the universe, they must also be necessary for those at the bottom of the economic pile. We have to recognise that the national minimum wage at its current level does not provide sufficient incentive in all circumstances, when taking into account all the benefits that people will lose. We need to address that question, and I am very disappointed that the new Liberal party policy seems to be opposed to any increase in the national minimum wage.
	As I understand it, the Liberals have now swung to the right. The first clear evidence that they are deserting the traditional caring aspect they embraced under previous leaders may be that they are distancing themselves from any prospect of an increase in the national minimum wage. I deplore that, and I am sure that the vast majority of my colleagues do, too, although I do not want to make too much of a meal of it. I simply draw to the attention of the House the fact that the Liberals are opposed to increasing the national minimum wage.
	My final point is about Scotland. Many Members will be aware that the Scottish Executive have promised that money from Qatar will flow like water, that Qatar will provide an alternative to PFI and PPP and that Qatar will provide funds for public finances and for the private sector. Many Members will have noticed that the nationalists have disappeared from the Chamber. They did everything but intervene when I raised the point earlier.
	Many Members will be aware that in the past the nationalists said that Scotland's oil would be the answer to the nation's problems. Now it appears that Qatar's oil will be the answer to Scotland's problems. Again, I do not particularly want to make a meal of that fact—I just draw it to people's attention. I am sure that the Qataris will be very unhappy that their name has been used to intervene in domestic British politics in this way.
	I have been invited by madam gamekeeper not to go beyond 9.40 pm, so I draw my remarks to a close. When we discuss employment, people in my constituency remember that we cannot trust the Tories. We could not trust them in the past, and we cannot trust them now. I do not accept that they are serious about trying to combat the evils of worklessness.

Alan Duncan: Our debate this evening takes place against the backdrop of increasingly serious economic difficulty. Over the past few weeks, we have seen great turmoil in financial markets, and Members on both sides of the House share concern that it risks turning into turmoil in labour markets. Unemployment is a scourge. We have to work together across the House to confront enormous economic difficulties, which none of us can wholly understand, to try to do our best to ensure that they do not turn into the unemployment and human misery that the debate is all about.
	I am afraid that by the end of tonight's proceedings, we will all have painted a rather depressing picture of what might be coming down the track at us. When it comes to the problems that we want to confront, the starting point is not really one of which the Government can be proud. It is not a proud boast that after 10 or more years of economic prosperity, unemployment stands at "only" 1.7 million. Let us compare that with the situation in many of the years that speakers have mentioned tonight; it is triple what was seen as an absolutely unacceptable level of unemployment in the 1970s. The starting point is not a happy one, which means that what will follow may be extremely serious.
	The climate for future employment is not healthy, and one reason why is that after the 10 years to which I have referred, our economy and fiscal position should be in a much better position to cope. We should now have lower taxation. Instead of Government borrowing, we should have a surplus. We should have higher savings and a massive pensions pot. Sadly, we have none of those things, and in my view, unemployment is relatively high. We have higher taxes, more regulation and the worst budget deficit in the developed world. We have squandered a decade of growth, and that will make the pain far greater when we have to face what is around the corner.
	We have had a lively debate. The right hon. Member for Manchester, Gorton (Sir Gerald Kaufman) began the Back-Bench speeches and spoke in his inimitable style. I thought that he showed insufficient appreciation of the ferocity of the business cycle—a ferocity that his constituents will yet have to withstand. My hon. Friend the Member for North Thanet (Mr. Gale) spoke about jobcentre closures. He also mentioned empty property rates, which I shall come on to in a minute. I thought that the hon. Member for Edinburgh, South (Nigel Griffiths) was unduly vitriolic, and looked only to the past. Our concern tonight is about the future.
	My hon. Friend the Member for Harwich (Mr. Carswell) was especially convincing on the Prime Minister's view on immigrant workers, but the victor ludorum tonight is the hon. Member for Livingston (Mr. Devine), who is temporarily out of the Chamber—it is certainly a brave man who becomes his psychiatrist. The mistake that he made, when levelling accusations against us, was insufficiently to appreciate the fact that so many of the problems of the '80s—high tax, inflation, underinvestment, restrictive practices and loss of competitiveness—were caused by what had gone before. I am not sure whether the Secretary of State was even born then, but he can always turn to the history books.
	My hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb) proved that Labour's monopoly of concern is not safe in its hands. The hon. Member for Ynys Môn (Albert Owen)—I am sorry that I missed a bit of his speech—was, once again, looking back. My hon. Friend the Member for Wellingborough (Mr. Bone) showed a rather more accurate grasp of history. The hon. Member for Glasgow, South-West (Mr. Davidson), once he had decomplexified everything, showed a much greater sense of realism, which he injected into our debate.
	I am the Conservative spokesman for the Department for business. It is vital that the UK has a strong business sector, and that Whitehall speaks up strongly for business, if we are to counter the scourge of unemployment. I fear that the Department for Business, Enterprise and Regulatory Reform, whose Ministers I face across the Chamber, has not done as well as it could have done over the past 10 years. There have been 38 Ministers and seven Secretaries of State, and the Minister with responsibility for small firms has changed on average once every 18 months. The construction portfolio alone has changed six times since 2001. We are talking about the Department that needs to oversee all the economic activity that ultimately gives us all our wealth, which all other Departments then spend.
	Unfortunately, I will not even be able to face my opposite number across the Floor of the House. For these few days, until he is duly ennobled, I can accurately call him Mr. Mandelson. It is a great pity that I will not face anyone of Cabinet rank across the Dispatch Box. When we had a Cabinet Minister in the Lords, be it Lord Carrington or Lord Young, there was always a Member of this House of Cabinet rank whose voice in Cabinet from the Commons would always be there, but we do not have that under the future Lord Mandelson.

Rob Marris: Will the hon. Gentleman give way?

Alan Duncan: Very briefly, if the hon. Gentleman is extremely quick.

Rob Marris: I will be brief. I assure the hon. Gentleman that the Minister of State, Department for Business, Enterprise and Regulatory Reform, the hon. Member for Wolverhampton, South-East (Mr. McFadden), is a fine parliamentarian who will do a fine job speaking for the Government.

Alan Duncan: Yes, but he is not in the Cabinet, as I have said.
	I fear that the prospects for employment are grim. We have seen institutional mayhem, and the concern is that even within a matter of weeks businesses, small, medium and large, will have their credit lines withdrawn and their overdrafts cancelled, that they will not be able to pay their bills, and that people who are paying them will take longer and longer to pay what they owe. The picture that we can therefore foresee of a credit squeeze going right to the high street, to households and into corporate Britain is potentially apocalyptic. If the bank problems that we face today are not addressed in short order, the mayhem in the business community will hit people in a way in which no one has been hit for nearly a century.
	We must address the matter carefully. The problem is that almost everything that the Government have done in the corporate sector over the past decade will make things worse. It is so easy to tax and put burdens on business as the economy is rising, but when the inevitable downturn comes, those burdens are like an albatross around its neck. The danger, therefore, is that those burdens on business will convert immediately into unemployment.
	People can pay £20,000 in stamp duty on housing when the market is going up. When the market is going down, that renders it immediately stagnant, driving out of work estate agents and people who do up houses, and the whole collateral of many small businesses is diminished. We have seen tax for businesses rise. Corporation tax, particularly for small businesses, was raised at just the time when it needed to go down. There has been messing around with capital gains tax. We have seen a challenge to income shifting, which is exactly the underpinning focus for families and couples who run a business.
	We have seen fuel duty interrupt the clear economics of business. We have seen regulation increasing. We have seen employment tribunals making it too intimidating for an employer to take on their first employee. We have seen business rates that are particularly punishing for small businesses and high street shops. The ports sector—some Members present may have one of the 56 ports in this country in their constituencies—is about to face national domestic rate demands backdated in an immoral way to April 2005.
	Perhaps most immoral of all, taxing something that generates no revenue does enormous damage. Removing the tax relief for empty property rates is bringing to a grinding halt any kind of activity for preparing business premises or developing wrecked premises for future use. It is taking money from people who have not got it to the point where they have to take the roof off or demolish what they have just built.
	If the Secretary of State and the Minister do not want to take my word for it, perhaps they will study early-day motion 2045 tabled by the hon. Member for Halifax (Mrs. Riordan), assisted by the hon. Member for Middlesbrough, South and East Cleveland (Dr. Kumar). In an e-mail to all Members, the hon. Lady states:
	"In these difficult times, I know that we should not make things worse for employers."
	She lists all the damage that the tax is doing—early demolitions, shelved regeneration projects, loss of inward and overseas investment, bankruptcies and hence, unemployment and the loss of pensions. Perhaps the Minister can tell me whether he agrees with his own Back Benchers that the tax is but one of the measures that is making the future rise in unemployment higher than it would otherwise be, which is adding to the recession that the British Chambers of Commerce says is already upon us.
	We need financial stability. We need our proposed reduction in corporation tax. We need a higher threshold for stamp duty as advocated by the shadow Chancellor. We need a reduction in regulation. We need the effective implementation of the small business support fund promised at the EU meeting last week, and, yes, we need the reform of insolvency law, so that those who are on the edge of bankruptcy can be protected from their creditors.
	The lesson of this is that nothing has been set aside for a rainy day. Labour Governments always run out of money, and once this crisis is behind us the best prospects for an economic recovery will come only from a change of Government.

Tony McNulty: This should have been a serious debate.

James Gray: Until now.

Tony McNulty: The jokes might be fun, but they are made at the expense of the Opposition, because at this time of all times in this place, with all that is going on in the broader country, all we have heard from the man who purports to speak for the Opposition on business is that there should be less borrowing, less taxation and less regulation. Conservative Members should run away and turn their televisions on. At this moment of all moments, borrowing and taxation equal public expenditure, the very public expenditure that we shall use here and elsewhere to lessen the impact of any slowdown. Given his contribution, the Opposition spokesman cannot be taken seriously.
	Yesterday, a senior member of the Tory Front Bench said:
	"Families are deeply worried about their savings, their homes and their jobs, and it is up to us to try to work together to get the country through this current crisis. I do not think that the British public would thank us if they saw happening here in this House of Commons what everyone saw happening in the American Congress. That is why we offer to look constructively at any proposals brought forward by the British Government."—[ Official Report, 6 October 2008; Vol. 480, c. 23.]
	I fully endorse that. We have had nothing in that spirit from either the hon. Member for Epsom and Ewell (Chris Grayling) or the hon. Member for Rutland and Melton (Alan Duncan). They could have been consensual. They claim to be consensual on the issue of unemployment and welfare reform.  [Interruption.] With the greatest respect, I thought that I might speak to the motion and our amendment rather than take a back-of-a-cigarette-packet approach. They could have recognised that intervention is essential, as my right hon. Friend the Secretary of State for Work and Pensions said. They could have said that a lot has been done to great effect over the past 10 years in assisting those currently and previously unemployed. They could have headlined that they will keep up the pressure on us to ensure that the pace of welfare reform is greater not lesser. They did none of that. Instead, we heard a complete dismissal from the hon. Gentleman of all that Jobcentre Plus has done for so many of our communities throughout this country over the years; work that means that whatever the severity of any forthcoming slowdown we are better placed than we have ever been to help and assist those who are unemployed for however long. For it to be so glibly dismissed by the hon. Gentlemen defies belief.
	I do not claim a monopoly of concern about unemployment and I accept that there is no such monopoly among Labour Members, but it would be hard to credit Opposition spokesmen with that from their speeches, which is a shame. Among other things they could have apologised for, as so many of my right hon. and hon. Friends have so eloquently put it, was the scandalous waste of human talent in the 1980s and 1990s when the Conservatives were in charge, when there was no intervention of any substance to assist the unemployed and no conditionality, and when there was precisely the fiddling of figures that is the charge falsely laid against us at this stage. They could have apologised for putting so many of our people and communities on the proverbial scrapheap, causing heartbreak and destruction.

Robert Flello: What would my hon. Friend say to the former miner whom I met only last Thursday? That former miner may have seen this debate in a crystal ball. He was put out of work in the '80s when the north Staffordshire coal mines were not only completely closed, but filled in with concrete day after day. What would my hon. Friend say to him? He is still embittered about it now.

Tony McNulty: I would say to him that there is a package available to him now that was not there in the '80s.
	The hon. Member for Epsom and Ewell could have gone further, been honest and explained how less public expenditure, in terms of the magnitude that the Conservatives are referring to, and the whole notion of a shrinking state helps any of the unemployed people in this country. We got a sub-prime cabaret from the Little and Large of the Tory Front Bench. That is a real shame, because we are discussing a serious matter.
	The Conservatives are playing the same game of smoke and mirrors with this issue as they are playing across the piece on policy, to hide the wasteland and absence of any Conservative policy. They propose either what we are already doing or what we already propose to do and claim that as their own as though it were radical. I want the hon. Member for Epsom and Ewell to help me, the Government and the country with the welfare reform agenda, as he promises to. I want him to make clear exactly where he stands on every aspect of our Green Paper, subsequent White Paper and Bill. If he is serious about a consensus and in thinking that we need substantive welfare reform, which has been outlined by my right hon. Friend the Secretary of State, we will work with him. However, given his contribution, I fear that we will be waiting a long time. Whatever the rhetoric—heightened, sub-prime or otherwise—in this place, it is simply not good enough to condemn the progress made by initiatives such as Jobcentre Plus and the other significant progress on getting people back into work.
	Are there problems and difficulties? Yes, there are, as my right hon. Friend the Secretary of State said in no uncertain terms. Do we have a monopoly on caring? No, of course we do not. However, we collectively have the experience of the '80s and '90s and it is important that there should be a serious and substantive debate on this matter.
	It is no accident that there was a Celtic tinge to the contributions from my hon. Friends. My hon. Friends the Members for Edinburgh, South (Nigel Griffiths), for Livingston (Mr. Devine) and for Ynys Môn (Albert Owen) all spoke, as did my hon. Friend the Member for Glasgow, South-West (Mr. Davidson), who made a point about decomplexification. They were not wallowing in the past, as was suggested by the Conservatives. They recognised that we cannot go back to the '80s and '90s and that we cannot have the non-intervention, "not our fault, guv" approach that the Conservative Government took in those decades. It is time that there was some consensus in this House. Whatever the depth of the current downturn, and however much harder it makes it to find work, it is not a reason for despair, as has been suggested by some Conservative Members—not least because of what we have already put in place.
	My right hon. Friend said clearly that we should treat the current downturn as a spur across the Dispatch Box to ensure that we get even more help to those who need it to overcome challenges—not by fiddling figures or consigning people to inactive benefits and still less by slackening the pace of welfare reform, but by ensuring that we have high expectations, effective support and real obligations not for the minority, but for everyone. We know and understand the lessons of history and we want to get to a stage at which this time, whatever the level of unemployment, nobody in this country will be written off or left behind. As is clearly stated in the Government amendment, we will build on the progress that we have already made to make sure that we do not return to the shameful history and experience of unemployment, perpetrated by the Conservative party in this country.

Question put, That the original words stand part of the Question:—
	 The House divided: Ayes 205, Noes 300.

Question accordingly negatived.
	 Question, That the proposed words be there added,  put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—
	 The House divided: Ayes 293, Noes 203.

Question accordingly agreed to.
	Mr. Speaker  forthwith declared the main Question, as amended, to be agreed to.
	 Resolved,
	That this House notes the global economic challenges that are facing the UK; congratulates the Government on policies such as Local Employment Partnerships which have helped nearly 40,000 people find work, Pathways to Work which has supported more than 94,000 people off Incapacity Benefit and into work, and the New Deal which has helped 1.97 million people into jobs; welcomes the policies of this Government which seek to reform the welfare state to give people active support to get back into work as quickly as possible; and supports rapid action to ensure that where redundancies occur people are given the personalised support they need to return to work, to intensify the activity of the welfare state to ensure no-one is written off and to maintain a strong and flexible labour market.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Delegated Legislation Committees),
	That the Employment and Support Allowance (Consequential Provisions) (No. 2) Regulations 2008 (S.I., 2008, No. 1554), dated 12th June, be referred to a Delegated Legislation Committee. —[Ms Diana R. Johnson.]
	 Question agreed to.

european documents

Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9)(European Committees),

Aviation Safety and the Single European Sky

That this House takes note of European Union Documents Nos. 11325/08, Commission Communication on Single European Sky II, towards more sustainable and better performing aviation, 11347/08 and Addendum 1, Commission Staff Working Document accompanying the Communication on Single European Sky II, the SESAR Master Plan for the development and implementation of the new generation European air traffic management system (SESAR-Single European Sky ATM Research), 11323/08 and Addenda 1 and 2, Draft Regulation amending Regulations (EC) No. 549/2004, No. 550/2004, No. 551/2004 and No. 552/2004 in order to improve the performance and sustainability of the European aviation system, 11285/08 and Addenda 1 and 2, Draft Regulation amending Regulation (EC) No. 216/2008 in the field of aerodromes, air traffic management and air navigation services and repealing Council Directive 06/23/EEC; and endorses the Government's approach to discussions on these documents. —[Ms Diana R. Johnson.]
	 Question agreed to.

PETITIONS

Ending Violence Against Women

Andrew Selous: I have pleasure in presenting a petition handed to me by the Women's Institute of the village of Heath and Reach, in my constituency, to whose members I spoke last month. It concerns the ending of violence against women, and reads as follows:
	To the House of Commons,
	The Petition of the Women's Institute ending violence against women campaign,
	Declares that 3 million women across the UK experience rape, domestic violence, forced marriage, stalking, sexual exploitation, trafficking or another form of violence each year; the Women's Institute is concerned that the Government is not doing enough to prevent violence against women occurring; there seems to a mentality that abuse of women and girls is a fact of life. The petitioners believe that violence against women is a cause and consequence of women's inequality. In 1995 the UK adopted the platform for Action in Beijing at the 4th World Conference on Women to address the goals of inequality, development and peace for all women around the world. There were twelve critical areas of concern where strategic action was needed; one of these was violence against women.
	The Petitioners therefore request that the House of Commons urges the Government to stand by the UK's commitment to afford women and girls their basic human rights to live free from violence and its threat by taking steps to eliminate violence against women.
	And the Petitioners remain, etc.
	[P000269]

Protection of Playing Fields

Bob Spink: I am honoured to present a petition organised by Jo Grey and other excellent community campaigners on Canvey island against the selling off of one of our secondary school fields by Essex county council so that the borough council can build houses that are not wanted and that will cause blight and harm to the wider community of Canvey island. I warmly congratulate all who signed the petition, including Dave Blackwell, who brought the petition to my attention. He is a superb fighter for the people of Canvey island, along with his independent council colleagues.
	The petition states:
	The Petition of Jo Grey, concerned Canvey Island residents, and others
	Declares that Castle Point Council is wrong to plan to build over 100 houses on Castle View School Playing field, that this is insensitive, inappropriate and will result in more homes built on a green belt, high flood risk site; believes that there is sufficient previously developed, brown land to build any necessary additional homes without selling off valuable school playing fields for that purpose, and that councillors should stand up for residents' interests and consider the impact of their plans on road congestion and safety for all Island residents, and reject the Castle Point Borough Council Core Strategy.
	The Petitioners therefore request that the House of Commons urges the Government to press Castle Point Borough Councillors to speak out and act and vote against the plan to sell off a Canvey Island school playing field for yet more building.
	And the Petitioners remain, etc.
	[P000272]

Energy Efficiency

Bob Spink: I am sure the House needs no reminding of the importance of improving energy efficiency in domestic homes and businesses. This petition, which supports an electronic petition of approaching 1,000 signatures, calls on the Government to put their money where their mouth is, and to promote energy efficiency and our excellent hi-tech British manufacturing industry. How could they refuse? However, I stress that I do not promote any particular business or product and I have no personal interest in any of this.
	The petition states:
	The Petition of Andy Jones and concerned residents,
	Declares that substantial energy savings, and consequential environmental benefits, can be achieved by the use of high technology, generic, double glazing and other energy efficiency products and components and that the Government should therefore reduce VAT on such technically advanced products.
	The Petitioners therefore request that the House of Commons urges the Government to reduce VAT to 5 per cent. on products and components that will make a significant contribution to improving energy efficiency.
	And the Petitioners remain, etc.
	[P000271]

WORKSTEP (BLACKPOOL)

Motion made, and Question proposed, That this House do now adjourn. —[Ms Diana R. Johnson.]

Gordon Marsden: I am delighted to welcome my hon. Friend the Member for Chatham and Aylesford (Jonathan Shaw) to his new position of Minister with responsibility for disabled people and to wish him well in that post.
	Supporting people with disabilities to obtain useful and satisfying employment and to remain and, hopefully, progress in it is rightly an issue that commands great public interest and cross-party support. One such long-standing initiative has been the supported employment placement scheme, currently known as Workstep, whereby funding from Government—in this case the Department for Work and Pensions—is matched by a host employer. Among the local authorities who have taken part in this scheme has been my own, Blackpool council, which is Conservative controlled and whose adult social care and housing department has been responsible for administering it.
	The factsheet from Blackpool council issued in August 2007 stated:
	"Workstep recognises that disabled people often face complex barriers in finding and/or keeping a job...Workstep is for you if you are disabled as defined by the Disability Discrimination Act 1995...once the right job has been identified, you will receive ongoing support and advice to help you continue in your job and develop your skills and abilities."
	Unfortunately, the sequence of events that I have to relate tonight strongly suggests that for some of the people on Blackpool's Workstep scheme those supportive words have not been lived up to. Blackpool council initiated a process at the end of April this year that led to five months of pressure, anxiety and uncertainty for the people concerned and their families and friends.
	At that time, Blackpool had 30 people on the Workstep scheme, of whom 11 held contracts with Blackpool council but were placed with host employers. A number of the Workstep employees had been in long-term employment with host employers—hard-working and dedicated to the jobs they were doing, which provided them with self-esteem and financial stability. However, suddenly, without prior warning or consultation, those people were told that Blackpool council had reviewed Workstep scheme. The 11 who were contractually employed by Blackpool council but who—in the rather cold words of the note that was issued to them by the social care department—
	"provide work to another organisation"
	were told, along with their employers, that the council would no longer support the scheme as previously operated. As a result, I was contacted by family and representatives of two of the people affected, who were my constituents, and subsequently by an employer in my constituency of a third person. All those people had been left concerned and bewildered by not only what had been proposed, but the manner in which it had been presented.
	The "Changes to Workstep—Employee Information" document, which was read to one of my constituents at a meeting organised by Blackpool council's adult social care department on 22 May, said:
	"It has been identified that it is not financially viable for Blackpool Council to be paying, or partly paying individuals who do not provide work for the Council. We need to make 2 per cent. savings across the Council. Many senior management posts were made redundant last year, but more savings are required. The money paid out by the Council to support this scheme is greater than the money brought in. Unfortunately the Council cannot support the scheme in this way any longer.
	We have already spoken to your host employer about this and have asked them to consider if they will take you as an employee with their organisation, with a new contract of employments and on their terms and conditions. If the host employer agrees to offer you a position and you do accept, you will need to resign from your position at Blackpool Council. If this does not happen you will be at risk of redundancy."
	The note to employers gave a similar financial reason for changing the scheme but added that
	"as the individual has been working with you for such a long time and is trained and experienced in the role they have been undertaking, we would like you to consider appointing the individual. We are allowing discussions until the end of May. If agreement cannot be made about appointing the individual to your terms and conditions, our plan is to issue 12 weeks notice that the individuals are at risk of redundancy."
	I am not going to name in this House tonight the individuals about whom I was contacted—they have been put through enough pressure by these events—but it is worth quoting what one of them said about these notes at a subsequent meeting between him, his family and advisers, the host employer and officials of Blackpool's social care department to discuss the situation. They said:
	"I enjoy working here...with wonderful caring colleagues and have no desire to work anywhere else...the wording of this made me feel like I was a bag of rubbish waiting for the bin men to collect. I thought it was very sharp and impersonal. I feel like just a number being disposed of."
	In the wake of those concerns and complaints, I wrote on 20 May to Steve Pullan, the executive director for adult social care at Blackpool council, who had initiated the process to alter the position of these Workstep employees, asking him why the council proposed to terminate their contracts. What had further disturbed me since being made aware of the proposals was that conversations between my Westminster office and the contract provision delivery team of the Minister's own Department had confirmed that despite the funding provided to Blackpool council for the Workstep scheme by the Department—some £400 a month per employee—the council did not consult the Department's officials or, as far as I am aware, Jobcentre Plus, before acting unilaterally. Nor did it discuss the possibility of transitional arrangements to ease the stress and turbulence with which these employees were now threatened.
	I asked about the motivation for acting now, given that the Department had not altered its national funding or criteria, and the next national review of Workstep was not due until late 2009. The letter that I received back from Mr. Pullan did not address the financial issue but said instead, rather disingenuously, that as the Workstep contract
	"has an end date in 2009, we thought it worthwhile to look and plan ahead."
	He admitted:
	"These people have been with the host employers for many years"
	but said that since Workstep was designed to encourage progression and as
	"the group of 11 I mentioned above had not moved onto secure employment with the host we have actively reviewed the situation."
	My two constituents have worked with their host employers for about 20 years each—indeed the original placements were made via Lancashire county council, from which Blackpool council inherited responsibility for their contracts when the Blackpool authority became a unitary one 10 years ago. Why, therefore, had Blackpool council waited until now to decide that it needed to be moved on to encourage progression? It is perhaps not surprising that when comparing the reasons given in the notice that the adult and social care department issued with those given to me by Mr. Pullan in his reply to me, the relative of one of those affected said in an e-mail to him that
	"the clear shift of emphasis from efficiencies to forward planning is puzzling and disingenuous."
	What is equally puzzling is that, only five days after I had received my letter from Mr. Pullan, an e-mail sent by another council official to the employer, who had also queried the reasons and timing for the changes, said that
	"this decision has been made both on financial grounds and in order to deliver the objectives of the Workstep Scheme."
	The employer challenged the council about why
	"this just came out of the blue—if the scheme migrated and changed over the years you should have been in contact with both (the employee) and (us) so that a scheduled plan could have been put together".
	The official replied that
	"you are correct in stating that we could have taken these steps any time since 1998!"
	The council has continued to deny any financial motives for its actions, and, indeed, at a meeting with me last week Mr. Pullan again sought to insist that his junior officials had misunderstood the situation in their written explanations—but to do so not once but twice, in writing, looks at the very least, to echo Lady Bracknell, like carelessness.
	My meeting with Mr. Pullan came only after four months and two further letters from me both to Mr. Pullan and to Councillor Lily Henderson, the cabinet member with responsibility for his department's administration of Workstep, in which I questioned whether the council's actions were not against the spirit and possibly the letter both of equality and disability legislation, and also the Government's partnership with local authorities on Workstep. As well as being very slow to respond to direct questions from me and representatives of my constituents, the council has been evasive as well as insensitive in not appreciating how it has turned the lives of vulnerable people upside down more than a year in advance of a national review—as well as running the risk that because host employers had been placed under an unreasonable deadline, these people would end up redundant and demoralised.
	The fact that these issues have dragged on over the summer has exacerbated the situation. I have discovered that the assessments that were supposed to take place for employees to access their potential for progression were, at least in some cases, never properly carried out. I am disappointed that, despite both Councillor Henderson and Steve Pullan being made aware of the human impact of this situation, they failed to act urgently to relieve it.
	I have known one of my affected constituents and his family for 10 years. At the end of July, I visited him and his elderly mother in their home, where she was increasingly house-bound and where he had taken on increasing caring responsibilities. It was clear that they were both very upset and stressed at the threat to his job, and a note sent from the council's own occupational health doctor to the host employer over the summer confirmed that. Sadly, on 1 September, my constituent's mother died and since then he has been on sick leave. He is keen to return to work, but his doctor has advised against it at present. On 25 September, two women representatives of Blackpool council called on him and told him that the
	"redundancy steps were still in force and could be acted upon at a time of their choosing".
	The money saved by Blackpool council by abandoning its contractual obligations and top-up funding would, as Mr. Pullan has admitted to me, be comparatively meagre—probably less than £30,000 if enacted for all 11 employees. After all, the overwhelming proportion of the money comes not from the council but from employers, and the Government. Blackpool council is Conservative controlled, but I am pleased to report that my constituents' cases have been robustly supported by their individual councillors from both sides of the council, and I pay tribute to the strong advocacy by Labour councillor Fred Jackson and Conservative councillor Jim Holdsworth. I appreciate also the involvement of the council's chief executive, Steve Weaver, in trying to achieve closure on some of these issues. But even now the situation remains uncertain and not properly resolved.
	Mr. Pullan tells me that seven of the 11 individuals have now been transferred to host employers, but of course their salaries and terms and conditions are not guaranteed to be the same as they were. Of the other four, the gentleman who lost his mother is still at risk of redundancy. In one case, the council appears to have reversed its position and guaranteed employment until 2009, but whether that will be via the existing contract or by transfer to the host employer is still not clear. My office was told by the employer in my constituency that his employee was made redundant by the council, paid redundancy money and then re-employed by the host employer. When I raised this at my meeting with Mr. Pullan, he was unaware of the situation and I am now waiting for clarification.
	After all the inconsistencies and unequal outcomes that Blackpool council has produced, the decisions still appear to have been taken without any consultation with the Government or its agencies. In addition, the upheaval on which Mr. Pullan embarked and in which Councillor Henderson colluded ignored the overall context in which local authorities as providers of Workstep are obliged to operate in return for being funded by the Government.
	The Minister's predecessor—my hon. Friend the Member for Stirling (Mrs. McGuire), to whom I pay tribute for her commitment and advocacy as Minister with responsibility for disabled people—made that very clear in her letter to me in July after I had discussed Blackpool council's proposed action with her. She said that there was
	"clear recognition that some individuals will require long-term support in work, possibly for the whole of their working lives. In these cases Workstep providers should continue to provide support for as long as the customers require it. I feel it would be wrong for a provider to put pressure on any individual if they are not in a position to progress, or if it puts their current employment position at risk. This is clearly contrary to the overall aims of the programme."

Joan Humble: Is my hon. Friend aware that the recent consultation document on the Government's welfare to work strategy talks clearly about empowering people with disability, listening to people with disability and supporting people with disability in getting into work and while they are in work? Does he agree that in this instance our local authority has failed to do any of that and that it owes an explanation to the individuals concerned in the cases that he has outlined and to the Government?

Gordon Marsden: I agree absolutely with my hon. Friend on those points. Sadly, I am afraid that the way in which Mr. Pullan and Councillor Henderson have proceeded has caused these sorts of problems.
	The Government have made their commitment to the principles of Workstep and any continuing successor programmes beyond 2009 clear, both in the letter I received from the former Minister and in comments made in the House of Lords on 21 July by the Department for Work and Pensions Minister, the noble Lord McKenzie of Luton. Blackpool council should also now make that commitment as well as giving an undertaking to make sure that progression, assessment and support issues for disabled people with supportive employment are properly and professionally handled in future. At a time when the ruling Conservative cabinet of Blackpool council is keen to be seen to be promoting new equality initiatives, it should do no less if it aspires to be taken seriously about supporting disabled people. That might be some compensation for those who have been put through the wringer by the way in which Blackpool council has mishandled its stewardship of the Workstep scheme for the people it held under contract, to whom it owed a duty of care.

Jonathan R Shaw: I congratulate my hon. Friend the Member for Blackpool, South (Mr. Marsden), who was ably supported by my hon. Friend the Member for Blackpool, North and Fleetwood (Mrs. Humble). She echoed some of the concerns that he set out this evening on behalf of his constituents. I am grateful for the way in which he has presented his case. He has referred to correspondence with my predecessor, my hon. Friend the Member for Stirling (Mrs. McGuire). The whole House will agree that she did a fantastic job as Minister responsible for disabled people. She has rightly won warm applause from stakeholders and colleagues and from our party.
	Before I come to the detail of the case involving Blackpool council and my hon. Friends' constituents, let me say a few words about Workstep and our determination to build further on the contribution the programme makes to the lives of those it helps. As a result of Workstep, our programme of supported employment, some 17,000 people are taking part in paid work Without the programme, those people would be unlikely to be able to work. They would have to resort to benefits, and would be denied the chance to make a contribution and to achieve the satisfaction of receiving their wage for the job in return for work.
	The Government believe that paid work is the best route out of poverty, and the best route to social and economic inclusion. We need all our partners across the board—local authorities, voluntary sector organisations and many other agencies—to deliver the programme. It cannot be delivered without them, and we rely on their co-operation and partnership.
	In July, we published our ambitious plans for welfare reform. These plans are all about making better use of the human resources at our disposal and ensuring that no one is written off. Despite the economic downturn, we remain determined to head for an 80 per cent. employment rate, and to reduce social exclusion by improving employment prospects for people facing the greatest challenge. We will not achieve that goal unless we help greater numbers of sick and disabled people to fulfil what I believe is their ambition—that is, paid employment. We need to have in place a modern framework of flexible support.
	Earlier this year, we consulted on proposals to reform the specialist disability employment services, including Workstep. Our proposals received strong support from the 450 people and organisations who responded. I referred earlier to the welfare reform Green Paper entitled "No one written off: reforming welfare to reward responsibility", which was published in July this year. It promised that the Department would implement these reforms. The Green Paper also said that the Department would expand its supported employment budget—by amounts yet to be decided—and proposed that disabled people who could be helped effectively through more mainstream employment programmes, such as our new deals, wherever possible should use this support rather than specialist provision.
	We propose to enhance the role of the disability employment advisers in Jobcentre Plus to help to ensure that support is targeted toward those who need it, and that disabled people get the right support package to help them achieve their employment goals. Our aim is to move away from the current separate programmes, including the job introduction scheme, work preparation and Workstep, and towards a new, more flexible and less prescriptive programme that can be tailored more easily to the individual needs of disabled people and that is more focused on job entries.
	That approach will help us to move away from "one size fits all" and towards a more flexible approach that recognises the very individual needs of every person. This is in line with our welfare reform approach to offer more flexible and personalised support. The programme will be delivered in partnership with organisations from the public, private and third sectors, and will cover pre-employment support right through to job retention and longer-term supported employment. We expect to publish the DWP's response to the public consultation later in the year.
	July's welfare reform Green Paper demonstrated our commitment to providing support for sick and disabled people to take up and keep paid work. That is part of our philosophy of putting money into support instead of benefits. The Green Paper contained a commitment to doubling the access to work budget for 2013-14. That will enable us to expand the reach of the programme, enabling us to reassure employers, benefits claimants and people seeking help to retain their jobs, that support will be available to all those who need it. We estimate that that will expand the programme's capacity to around 48,000 by 2013-14. I am keen to explore how we can make access to work more responsive to the needs of customers with fluctuating conditions, including mental health conditions.
	I turn now to the points raised by my hon. Friend the Member for Blackpool, South. As I said earlier, I understand the concerns of customers on this scheme. While the DWP of course wants to encourage as many people as possible to secure contracts with their host employers, we have not insisted that they do this for all customers or by any set date. I hope that that is very clear.
	Even when we introduce our reforms, we accept that some customers will require long-term support, and that this might not always be provided by a host employer. My Department can continue to provide funding in respect of those customers who remain on the books of the provider, although we will expect that every effort will be made to find host employers. We need to strike the right balance between incentives for customers to have contracts with host employers that improve their work experiences in the long term and longer-term support with providers for those who need time to acquire the skills and experience that employers want.
	I am pleased to tell the House that of the original 11 Workstep customers my hon. Friend reported as having no contract with a host employer, seven now have such a contract. All seven customers are still being supported by the Workstep programme, under the existing Workstep contract held by his local authority—Blackpool council. The four who do not are still employed by Blackpool council, which I understand is continuing its efforts to obtain contracts with host employers.
	The Workstep programme contracts with 172 providers, of whom 120 are local authorities. The Department has not been made aware of any other local authority that is taking action similar to that of Blackpool council in relation to their Workstep contracts. I said earlier that we rely on the partnership of the people and organisations with whom we place the contracts, so I say to Blackpool and any other local authority with concerns about particular people on the scheme that they should pick up the phone. They should contact us. That is the way to resolve concerns and problems. Let us work in partnership—I am sure that Blackpool council talks a great deal about that in its community. I do not seek to blame; I simply say to Blackpool or any other council, "Pick up the phone and we will resolve the issues".
	 Question put and agreed to.
	 Adjourned accordingly at four minutes to Eleven o'clock.